With the rising land prices, bridging the housing shortage gap is becoming increasingly a mirage as developers and brokers smile all the way to the bank. PHOTO|FILE. NATION
In Summary
Esther is among many speculators and brokers keen on cashing in on the booming real estate business.
Areas considered to be low market have also seen prices escalate. In Joska, Ruai, Kamulu, Njiru, the cost of land 10 years ago was Sh300,000 for an acre.
Today, you will be lucky to pay Sh450,000 for an eighth of an acre.
By ALLAN OLINGO
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Land prices have shown no signs of stabilising and this is now a concern to the middle class, who feel that the prices are now out of their reach.
As the trend continues, bridging the housing shortage gap is looking increasingly a mirage as developers and brokers smile all the way to the bank.
Esther Ndunda, a banker, bought an eighth of an acre piece of land through a Sacco in 2010 for Sh340,000.
Despite never having bothered to do a site visit, Esther has placed it on sale and is asking for Sh800,000.
“I bought this piece purely for speculation. I knew I could make a kill and I am selling it at that price because I have done my research and learnt that land within that area is going for around that figure,” she says.
Esther is among many speculators and brokers keen on cashing in on the booming real estate business.
A decade ago, the cost of an acre in upmarket areas like Karen and Runda would fetch about Sh8 million.
Five years later, the cost had doubled to Sh15 million. Currently, one would be lucky to find land in this area and the best price you can get is Sh20 million for a quarter of an acre.
For middle-income areas like Syokimau, Kitengela, Kiambu, Juja, and Ruiru, land cost Sh300,000 in 2000. Currently, an eighth of an acre in Juja goes for Sh1.2 million while in Kitengela, Athi River, and adjacent areas, it goes for Sh800,000.
Areas considered to be low market have also seen prices escalate. In Joska, Ruai, Kamulu, Njiru, the cost of land 10 years ago was Sh300,000 for an acre.
Today, you will be lucky to pay Sh450,000 for an eighth of an acre.
So why is the cost of land increasing? And is it justified, given that the infrastructure remains unchanged?
Valuer Charles Peter Mwangi says speculators have been behind the increasing land prices around Nairobi since the year 2000.
This is in tandem with the increased demand by Nairobi’s middle class.
“Since 2000, we have seen a bias towards building of homes. Brokers and speculators have taken advantage of this to increase land prices to make a kill.
For example, suburbs like Lavington, Spring Valley, Karen, and Runda have seen steep rises in land prices and have now become almost unaffordable.
For people out to sell houses, the land price makes the overall cost shoot up,” he says.
Kennedy Otieno, another valuer, says that previously the cheapest land around Nairobi was to be found in areas with black cotton soil and access issues but with the advent of the by-passes, these areas have opened up, causing the cost of land to skyrocket.
“We have brokers who have managed to buy huge tracts of land that they are currently sub-dividing and selling off at high price,” says Otieno.
“This is after the proposals to build new roads by the government went through and the bypasses became a reality. These areas are now accessible.”
Along tarmac roads
Otieno says that when you look at the areas the Eastern Bypass runs through, a quarter-acre of land goes for around Sh900,000, yet before the by-pass, this was the price of an acre.
“It is a well-known fact that land appreciates in value along tarmac roads, therefore once these areas are tarmacked, the value will increase along the roads as opposed to areas towards the hinterland,” he says.
So, who will save Kenyans from the skyrocketing land prices?
“I believe the Ministry (of Lands) should come out and do something about this because high cost of land basically means high cost of houses, which in turn means that most people will not be able to afford them,” says Mwangi.
He adds that in the Eastern By-pass area around Ruiru, land prices have more than doubled.
“I do not believe that most Kenyans’ incomes have increased by that margin. Who are these people buying these pieces? How will the common mwananchi without the financial muscle be able to afford these properties?” he asks.
Mohamed Dhershi, a developer in Kitengela, says that if land prices can be tamed, then property prices would come down, bringing them within the reach of most Kenyans.
“The high property prices are as a result of high land prices coupled with high building costs.
If the price of land acquisition was cheaper, then I don’t see why houses being sold expensively would not be affordable,” he says.
Dhershi says that some of the land is overpriced and with more people occupying less ground space and ever-changing human preferences, the prices offered for the land is not really worth the cost.
Currently, real estate analysts divide the Kenyan real estate market into two categories of investors: Speculators and cash flow investors.
The speculators normally buy land and sit on it, waiting for it to gain value. It is the majority of urban land dwellers out to make huge gains through the expected high demands.
This is what happened at Konza Techno City, where speculators rushed to buy the adjacent land in the hope that when the project kicks off, they would cash in on it.
The other type is the cash flow investor who adds value to the plot by way of development and ends up gaining both ways.
The value of the property will appreciate because of the added amenities.
Kenya’s population is growing by one million people per annum to its present 38.6 million, with 32.2 per cent or 12.4 million of its population residing in urban areas, up from 23.6 per cent or 5.6 million in 1990.
This means property developers can sit pretty because they know the market is there.
Since 2004, the prices of houses in Nairobi have doubled, something former Housing Minister Soita Shitanda attributed to the high cost of land in Nairobi as well as the growing demand for housing in the city.
Recent property indices by Hass Consult show that the prices of apartments in Nairobi’s middle-income areas have more than doubled in the past five years, a fact they attribute to rapid urbanisation, steady population growth, and expansion of the middle class.
Huge returns
“The huge returns from the property market have encouraged the flow of billions of shillings into real estate, pushing land prices to record levels,” says Sakina Hassanali, the head of research and marketing at Hass Consult.
Late last year, a CFC Stanbic report noted that property prices had risen 3.5 times over the past decade compared to share prices, which have appreciated 2.42 times over the same period at the Nairobi Securities Exchange.
Maybe this explains the ever-increasing land prices as the sharks swim out of the stocks market straight into the real estate field.
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