Asking prices rose by 4pc in second quarter 

The asking prices for property rose by an average of four per cent in the second quarter of this year.

 Presenting the price indices for the second quarter, Ms Sakina Hassanali, head of research and marketing at Hass Consult, said property prices on average performed better than land prices in  the suburbs, which increased by 2.5 per cent.

“The better performance in suburban properties is mainly due to the prohibitive cost of land, which is making investors turn to properties which offer better value in the short term. For instance, an acre in Nairobi is going for Sh178.7 million on average, and this has left most investments in city land in the domain of large institutional investors,” said Ms Hassanali.

Asking prices for detached houses recorded the biggest increase of 5.2 per cent, followed by apartments, whose asking prices increased by 3.6 per cent. Meanwhile, the asking prices for semi-detached houses increased by 0.7 per cent.

“We believe that the increase in asking prices for detached houses is attributable to the growing appetite for properties that have larger space, offer lawns and garages. Additionally, detached houses are not as highly supplied as apartments, thus giving room for price appreciation,” said Ms Hassanali.

WESTERN BYPASS

With regard to rent, the increase  was much lower, with  rents detached houses rising by  2.2 per cent, followed by apartments which rose by 1.4 per cent, while semi-detached houses  recorded no changes in rents. Ms Hassanali said tenants were opting for detached houses in both Nairobi’s suburbs and satellite towns.

The price of land in the satellite towns continue to outpace those in the Nairobi suburbs by at least two times, primarily driven by infrastructural development.

The strong growth of asking prices in the satellite towns is due to the construction of roads leading to these  areas, and especially, the bypasses that circle the city. This has seen land owners ask for higher prices in anticipation that demand in these areas will increase.

Satellite towns that are along or close to the Northern, Southern, Eastern and the proposed Western bypass continue see strong growth in asking prices, said Ms Hassanali.

“The Western Bypass, in particular, has sparked interest in towns such as Ruaka and Limuru. In this quarter, we saw land owners hike prices following the announcement of the construction of the last of the bypasses, set to begin towards the end of the year. Prices in these two towns are following a similar pattern as towns such as Ruiru and Juja, whose strong performance in asking prices is attributed to increased accessibility of the towns courtesy of the Northern and Eastern bypasses,”  Ms Hassanali said.

This trend is expected to continue as the completion of the Western bypass will result in a ring network that will connect a majority of the satellite towns that are covered in the index, Ms Hassanali added.

Road construction has also played a major role in the appreciation of land prices in Nairobi’s suburbs. The expansion of the Outer Ring Road has fuelled a rise in asking prices in Donholm, which was the second best performing suburb in the second quarter , and the best performing in the last year.

In Nairobi, Muthaiga was the best performing suburb, with prices in the area increasing by a 13.1 per cent over the second quarter, while Kitisuru was the worst performing suburb, with a marginal 0.3 per cent decrease.

NEGATIVE SCORES

“Traffic-hit Mlolongo recorded a -10 per cent return in the second quarter, followed by Athi River with -4.4 per cent over the same period,” saidMs Hassanali.

Upper Hill continues to be the most expensive city suburb, with an average asking price of Sh 517 million per acre while Langata has the least expensive land at Sh50.8 million per acre.

Land in Ruaka continues to be the most expensive in the satellite towns, going for Sh68.3 million per acre, followed by Kiambu at Sh38.7 million per acre, said Ms Hassanali.

 “Overall, the industry’s growth can be catalysed if commercial banks reduce interest rates for developers, contractors and homeowners. The Central Bank of Kenya (CBK) reduced  the base rate in May and should now nudge banks to lower their rates in turn,” Ms Hassanali said.