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December 15, 2018

Land investors eyeing older suburbs as prices head to peak

Hass Consult Research and Marketing Manager Sakina Hassanali during the 2017 Second quarter Hass Property Index and Nairobi Land Price Index held in Nairobi on 26th July 2017./FAITH MUTEGI
Hass Consult Research and Marketing Manager Sakina Hassanali during the 2017 Second quarter Hass Property Index and Nairobi Land Price Index held in Nairobi on 26th July 2017./FAITH MUTEGI

Land and property investors are now turning to old suburbs as they have shown increased potential to unlock value in previously undersupplied regions, a survey has shown.

“Old and more established suburbs are being put on the market as owners move to capitalize on the now stable land prices,” Hass Consult head of development consulting and research Sakina Hassanali said yesterday. “Investors are now moving into the suburbs as they now perceive land prices to be attractive.”

She said that investors and developers are now basing their decisions on available industry data to tap into high yield investments adding that some of the most undersupplied sectors are apartments for the young working population.

“Over the years the price appreciation has gone down due to a mix of factors including a larger supply of units and in the absence of high capital gains investors are factoring in rental yields,” Hassanali said.

Land acquisition in Nairobi now consists primarily of developers keen to build high-density residential, commercial and retail properties that yield development profits.

The survey showed that asking rent for apartments dropped by 4.1 per cent during the second quarter, registering a 2.1 per cent year-on-year decline.

“Despite the fall, investor interest on rental property is still strong as there is a preference of consistence and assured returns in the difficult macroeconomic environment,” Hassanali said.

Land prices in Nairobi’s suburbs were nearly flat in the first three months of the year, rising 0.7 per cent compared to the previous quarter, the survey showed yesterday.

The quarterly survey by consultancy HassConsult attributed the slow growth to reduced demand by developers as they adopt a wait-and-see approach ahead of the August 8polls.

“In the last two weeks we have seen a complete drop in buying activity which is what we expected. I think a lot of people have a wait-and-see attitude,” Hassanali said. “We expect that this will probably rebound in around September if all goes well.”

The Hass Property Index is based on advertised land prices in 18 suburbs and 14 satellite towns.

Nairobi’s Upper Hill remains the most expensive area to buy land with an acre averaging at about Sh550.90 million from Sh542.1 million in the January-March period.

Kilimani was the second most expensive suburb where an acre costs an average Sh427.30 million 0.7 per cent lower than the average of Sh429.7 million during the previous quarter.

An acre in Westlands costs about Sh416.90 million, 4.7 per cent up from Sh414.30 million in the first quarter while in Parklands it costs about Sh410.90 million, a 0.1 per cent drop from Sh411.50 million.

Kileleshwa capped the top five most expensive Nairobi suburbs with an acre averaged at 289.80 million, a 1.2 per cent decline from a Sh293.5 million asking price.

The highest price increase was in Eastleigh where an acre now costs an average Sh278.80 million, a 7.2 per cent rise from Sh260.10 million.

“For the last year or two, Eastleigh had been underperforming. Initially because it had inflated so much, investors held back on it and the minute it started dropping it reached a level where it became attractive again,” Hassanali said.

During the quarter, the highest performing Nairobi satellite town was Syokimau with a quarterly growth rate of 5.6 per cent to average at Sh21 million.

Ruaka remained the most expensive satellite town with an average value of Sh81 million 0.6 per cent up from Sh80.5 million an acre in the January-March period.

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