Investments on outskirts of Nairobi sent land prices soaring

The value of land in Nairobi dropped in the first quarter of 2016, as that of satellite towns increased, says a report.

Land prices in Eastleigh, Gigiri, Muthaiga, Parklands and Lang’ata, dropped marginally by 0.2 per cent between January and March 2016, attributed to shift by land investors to satellite towns, according to the latest property index for the first quarter of this year.

HassConsult head of research and marketing Sakina Hassanali, said the rise in land prices in the satellite towns was driven by investment in infrastructure by county and national governments as well as the lower land prices compared to that of Nairobi suburbs.

“Athi River, Ruaka and Ruiru are some of the satellite places beginning to attract large scale residential and retail development.

“This development shift into Nairobi’s periphery is expected to accelerate as infrastructure is rolled out, preparing these towns to be the new frontier for land prices gains,” she said.

Accessibility to satellite towns has received a major boost as the bypass construction has eased congestion and lowered the commute time, making them appealing to investors and owner-occupiers.

The towns are attracting land speculators who wait for the price to further increase before selling it.

PRICES PER ACRE

The price per acre in Nairobi, however, remained high, limiting its primary market to developers keen to build high-density residential, commercial and retail properties that yield development profits, said Ms Hassanali.

Donholm veered of the curve to record a sharp increase in price of 9.3 per cent to average at Sh52.2 million per acre, following upgrading of Outering Road.

Housing prices also recorded double digit growth, peaking at 14.6 per cent over the year with semi-detached houses having an annual rent increase of 17.1 per cent.

The index tracks advertised rents and land prices in 18 major suburbs in Nairobi and 14 satellite towns.

Land prices in Upperhill were still the highest in Nairobi at an average Sh511 million per acre, while Ruaka topped the satellite towns with an acre averaging at Sh59.6 million

Karen had the lowest price of the 18 suburbs in Nairobi at Sh50.7 million, less than that of an acre in Ruaka, which Ms Hassanali attributed to the development cap of two houses per acre, limiting the returns.

“Low density suburbs always have a lower price per acre,” she added.

Apartments saw a rent correction with the highest drop in returns being seen in Westlands and Syokimau.

The decline in rents has been going on due to the high number of apartments in the rental property market.