Rising satellite towns drive down land prices in Nairobi

Money Markets

Hass Consult head of research and marketing Sakina Hassanali during a media briefing at the Sarova Stanley Hotel in Nairobi on April 18, 2016. PHOTO | SALATON NJAU 

By DOREEN WAINAINAH and AGEWA WAINAINA, dwainainah@ke.nationmedia.com

In Summary

• The land value in Nairobi suburbs, including Eastleigh, Gigiri, Muthaiga, Parklands and Lang'ata, fell marginally by 0.2 per cent between January and March 2016 due to a shift by land investors to satellite towns.
• Hass confirmed it was the first time the price dropped since it started the survey in 2009.
• Accessibility to satellite towns has received a major boost with the construction of the bypasses and other link roads that have eased congestion and lowered the commute time, making them appealing to investors and owner-occupiers.

Nairobi land prices dropped for the first time in the first three months of 2016 even as that for satellite towns rose, according to Hass Consult Property index.

The land value in Nairobi suburbs, including Eastleigh, Gigiri, Muthaiga, Parklands and Lang'ata, fell marginally by 0.2 per cent between January and March 2016 due to a shift by land investors to satellite towns. Hass confirmed it was the first time the price dropped since it started the survey in 2009.

Hass head of research and marketing Sakina Hassanali said the rise in land prices in satellite towns was driven by the investment in infrastructure by county and national governments as well as the lower land prices than in the city suburbs.

“Athi River, Ruaka and Ruiru are some of the satellite cities 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 this towns to be the new frontier for land prices gain,” she said.

Accessibility to satellite towns has received a major boost with the construction of the bypasses and other link roads that have eased congestion and lowered the commute time, making them appealing to investors and owner-occupiers.

The towns are attracting speculators who wait for the price to rise before they sell land off as well as those seeking to build own homes.

The price per acre in Nairobi remains 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 was exceptional though to record a sharp increase in price of 9.3 per cent to average Sh52.2 million an acre following the planned upgrade of Outer Ring Road.

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

Land prices in Upper Hill were still the highest in Nairobi at an average of Sh511 million an acre, while Ruaka topped the satellite towns with an acre averaging 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 return.

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

Apartments saw a rent correction with the highest drop seen in Westlands and Syokimau. The fall in rent price has been occasioned by the high number of apartments in the rental property market.

READ: Apartment rents in Nairobi decline for first time in 15 years

The high supply of apartments in areas where the middle class want to live such as Kileleshwa, Lavington, Dagoretti, Ruaka, Ngong Road and Kilimani has not been met by a corresponding demand.