Experts: Why real estate is picking up in Nairobi
The real estate market in Nairobi is steadily improving, if the performance indicators of the first quarter of this year are anything to go by.
The improvement is attributed to the conclusion of the prolonged electioneering period, which saw the market slump to its lowest levels in years.
The asking price for residential properties increased by 2.4 per cent between January and March.
However, the rents recorded a modest 1 per cent increase during the same period while the price of land recorded an overall 1.4 per cent increase.
LAND PRICES GROWTH
According to Cytonn Investments, a leading asset manager in the country, land prices in the city’s satellite towns recorded a 2.4 per cent growth.
“The satellite towns have outperformed Nairobi’s posh suburbs, which recorded almost a flat rate growth of 0.2 per cent, and this indicates that in the land sector, if you want to get value for your money, the satellite towns are the place to put your money,” said the report.
Juja was the best performing satellite town in terms of land prices, which increased by 7.7 per cent, driven by the relatively more affordable price of an average Sh12 million per acre, compared with areas such as Ruaka, where an acre costs Sh85million.
Land prices in Mlolongo performed the worst amongst the satellite towns, recording a 3.4 per cent drop.
This is attributed to the never-ending traffic jams on the busy Mombasa Road, which has seen many potential investors shy away from the area.
The price of land in Gigiri remained the highest, and appreciated from 4.5 to 4.8 per cent because of increased demand for high-end housing in the area because of its close proximity to the United Nations Environment Programme headquarters and a number of embassies.
Meanwhile, Kilimani suburb recorded only a 1.9 per cent increase in land prices.
Overall land prices in the city’s satellite towns outperformed its suburbs, recording a 2.4 per cent growth compared with the suburbs’ 0.3 per cent.
“This is attributed to the fact that land prices in Nairobi suburbs are driven mainly by demand from developers and not speculators, unlike in the satellite towns,” said the report, Affordable Housing in Kenya.
The city’s Lang’ata suburb was the best performing in apartments, with the sales price appreciating by 2.5 per cent, which is attributed to its close proximity to central business district.
“The apartment units in Langa’ta are also affordable compared to high-end units in its neighbourhood such as Karen,” said the report.
Lavington, once the most attractive location for apartments in Nairobi, was the worst performing, with prices declining by 1.5 per cent.
“Lavington is experiencing an increase in supply of apartments, and coupled with upcoming apartments surrounding the area, the prices of apartments are bound to decline,” the report noted.
In the detached units segment, the densely populated Eastleigh was the best performing suburb, with sales prices appreciating by 2.1 per cent. This is attributable to the high demand for affordable housing in the area.
Lavington was the worst performing suburb for detached houses, with prices declining by 1.5 per cent attributed to the rezoning of the area because of increased demand for high-rise developments.
“With many upcoming high-rise developments, Lavington is no longer attractive for potential buyers seeking detached units due to an increase in congestion,” the report said.
Ngong town was the best performing satellite town for both detached units and apartments, recording sales price increases of 3.7 per cent and 2.8 per cent respectively.
The ongoing infrastructural development in the area, such as the expansion of Ngong Road, the Southern by-pass, and the Ngong-Kimuka Standard Gauge Railway Station, all of which are opening up the area, are seen as factors making Ngong a real estate destination of choice for investors.
Juja town was the worst performing town in the apartments segment, with prices falling to a low of 0.3 per cent while Syokimau was the worst performing in the detached houses segment, recording a price decline of 0.4 per cent.
“For both towns — Juja and Syokimau — the slowdown in appreciation is attributed to low demand due to their locations far from the city, which makes them unattractive to potential clients,” said the report.
The report predicts a bright future for the real estate, which will be driven by the population and urbanisation growth rates of 2.6 per cent and 4.4 per cent respectively.
Other aspects that will continue to increase investor appetite inreal estate sector are the annual housing deficit of 200,000 units and government incentives such as a 50 per cent tax cut —from 30 per cent to 15 per cent — for private developers who build 100 affordable units annually.
The slashing of statutory fees such as the National Environment Management Authority and the National Construction Authority fees, coupled with stepping up the government’s affordable housing agenda and improving infrastructure, will also spur real estate growth this year.