RENTAL yield in Ruaka, the satellite town with the most expensive land prices, is estimated at 5.1 per cent per year, a survey by upstart fund manager Cytonn Investments suggests.
The survey conducted last August indicates the rental yield, which measures earnings for developers without factoring in price movements (capital gains), averages 4.6 and 5.45 per cent a year for one- and two-bedroom apartments, respectively.
The highest annual yield for one-bedroom apartments is 5.5 per cent while the two-bedroom's is estimated at 6.1 per cent.
Cytonn said its research team found Ruaka has a potential annual total return – overall earnings including capital gains – of more than 21 per cent.
This is slightly below the average of 23.99 per cent in August for Nairobi's suburbs and 14 satellite towns, according to consultancy HassConsult.
Cytonn said the survey focused on residences along Limuru Road, built over the last five years.
“We widened our scope of research to include one-bedroom apartments, as well as increase the number of comparable developments,” the fund manager with a bias on alternative investment assets said in the report on Monday. “As per our research on uptake of housing units in Nairobi’s satellite towns, Ruaka has the highest uptake at 93 per cent compared to an average of 73 per cent for the other satellite towns.”
Ruaka's growth has been largely driven by its proximity to the diplomatic blue zone in Gigiri and Runda.
The value of land there is also riding on the upcoming two mega shopping malls – 102-acre Two Rivers, owned by Centum and China’s Aviation Industry Corporation, and the 4.5-acre Rosslyn Riviera being developed by Peter Gethi.
“Prime land with frontage to tarmac road is scarce in the town resulting to an increase in linear developments along Limuru road towards Ndenderu,” the Cytonn report states.
The average price for land along the road in August was Sh100 million, the firm's research analyst said, dwarfing the other 13 Nairobi's satellite towns largely due to cut-throat competition for space.
According to quarterly survey by HassConsult, an acre in entire Ruaka sold for Sh58.6 million on average in 2015, a growth of 8.4 per cent year-on-year.
At that value, it was the most priced among the Nairobi's 14 satellite towns. It even beat Langata where an acre cost an average of Sh49 million, according to HassConsult report based on sale prices as advertised.
Land in Kiambu town was the second most expensive among satellite towns in 2015 at Sh35.9 million, followed by Mlolongo and Tigoni at Sh27.2 million and Sh18.5 million, respectively.
An acre in Ngong averaged Sh17.6 million, while in Syokimau, Ongata Ropngai, Ruiru, Limuru, Thika, Athi River Kitengela,Juja and Kiserian it stood at Sh17.2, Sh15.9, Sh15.3, Sh14.4, Sh14.4, Sh11.4, Sh8.6,7 and Sh6.1 million, respectively.
“We saw people in the satellite towns take on average three years or less to buy land, build and settle down,” Cytonn said in its report on Ruaka.
According to HassConsult's report, rent in the satellite towns rose by nine per cent on average, with Mlolongo postibng the highest growth at 17.7 per cent – even beating the suburbs.
“Asking rent prices have rose by more than two-fold since 2007 in Kiserian, Juja, Kiambu and Mlolongo as rental prices in Nairobi's suburbs get out of reach for majority of tenants,” HassConsult's research and marketing chief Sakina Hassanali said on January…
Ruaka's rent per square metre of a one-bedroom apartment was Sh387 in August, while two-bedroom's went for Sh428 per SQM.