Land the best performing investment in Nairobi
30 January 2015, 21:39
Nairobi – Land is the best performing form of asset investment in Nairobi’s nine researched suburbs with an outstanding 535 percent price increase per acre since 2007.
A report released by Hass Consult, a Real Estate firm, reveals that Upper Hill is the most expensive suburb where an acre piece of land costs around KES 470 million followed by Kilimani at about KES 370 million then Westlands at around KES 360 million.
Kenneth Kaniu, Stanlib Chief Investment Officer, a Hass Consult partner organization, said the recorded price rise within seven years is more than five-fold because an acre of land that cost KES 30 million currently costs KES 170 million. The steep price rise is due to commercial and high-density housing around the city.
“When we compared the investment growth in Nairobi’s land prices with other international investments - gold, oil and cattle, our development land in Nairobi has grown in price far more than any other of these international investments,” said Kaniu.
Unlike seven years ago, the skyrocketing land prices have locked out individual buyers leaving business institutions, investment partners and companies the only beneficiaries of prime lands in Nairobi suburbs and around the CBD.
However, the report establishes that variation in land prices within the suburbs is mainly caused by the land’s zone, accessibility, available infrastructure and desirability that included the surrounding property and the view.
“Where an area is zoned for commercial use or for high density residential having apartment blocks, the land itself becomes worth and more considerable than land for low density and residential development only,” said Kaniu.
“This is because the buildings that will be sold at the end will fetch far more income for a commercial high rise than a single detached house,” he noted.
Therefore, land prices in exclusively low density residential zones such as Runda Estate whose acreage land costs about KES 67 million are far lower than commercial and high density suburbs like Westlands where an acre costs around KES 360 million.
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Other four Nairobi’s suburbs where Hass Consult and StanLib researched on land price per acre include Kileleshwa (KES 250 million), Lavington (KES 200 million), Springvalley (KES 140 million), Runda (KES 60 million), Karen and Lang’ata (KES 40 million).
Hass Consult Head of Research and Marketing, Sakina Hassanali said steep land price rise in the nine suburbs is attributed to unprecedented growth in housing and construction of commercial buildings.
“We chose the nine suburbs based on its most intense scale of building and construction within the five-year research period. The suburbs have seen and are seeing the most construction, making land a key issue in supply and pricing,” said Hassanali.
“We collected more than 10 000 land records to understand the pricing trends in each suburb,” she added.
The report also predicts that land prices are to rise in Eastlands with the completion of the Outer Ring road’s expansion and construction; similarly it occurred with the construction of Thika Superhighway.
Regarding rent rates, Embakasi was identified as the suburb whose apartment rent charges rose by more than 30 per cent in 2014 followed by Kileleshwa, Lang’ata and South B respectively.
“There is still plenty of opportunities to provide the most accessible forms of middle class housing despite the constraints of land, finance costs and council charges,” said Hassanali.
Semi-detached houses also saw high demand growth in 2014 leading to a subdued rate rise in both purchase prices and rent charges while prices and rents of detached houses also rose after a relative underperformance two years ago.
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