The cost of land in Nairobi’s upmarket suburbs has shown glimmers of recovery from the lingering effect of Covid-19 pandemic that sent asking prices tumbling on reduced demand for commercial space.
Data by realtor HassConsult suggests average land prices for mid- to high-end estates of Nairobi in the quarter ended September increased at rates last seen in the pre-pandemic era.
The recovery has come at the Ruto administration enforced the 1.5 percent housing levy on workers’ earnings, marched by employers, in a bid to bridge the gaping deficit in the supply of houses largely in the low-end estates.
The data, based on advertised asking prices, shows land prices for suburbs on average edged up 0.39 percent in the review quarter compared to the previous three months, the highest growth since the last quarter of 2019.
The increment was 0.83 percent compared with a year earlier, according to the survey, which focuses on mid- to high-end suburbs where real estate activities are concentrated.
“Land in the city showed signs of price recovery with only three out of the 18 suburbs witnessing a price fall in quarter three, compared to 14 in the previous quarter,” researchers at HassConsult wrote in the latest report.
“Recovery of land prices is heavily attributed to the resurgence of development activity post-Covid.”
The three suburbs where plot owners cut prices in the three-month period through July include Kileleshwa where an acre cost 0.6 percent less than the quarter before to an average of Sh292 million. Others are Donholm where land prices dropped 0.5 percent to average Sh77.8 million an acre and Riverside (0.2 percent to Sh320.1 million).
Nairobi’s real estate market has struggled to recover from the economic fallout that followed the pandemic more than three years ago.
Industry data has shown that land prices stagnated in some suburbs, signalling reduced demand, which prompted some owners to lower prices. The demand for the usually pricey land in the upmarket suburbs was hit largely due to the loss of earnings and jobs and cautious lending by banks.
This prompted families and businesses to keep their cash in hand as they tried to ride out of the increasingly growing economic uncertainty compounded by elevated upward price pressures that followed Russia’s brutal war in Ukraine.
The real estate sector had been one of Kenya’s fastest-growing asset classes for investors in the decade to 2015, with returns outpacing equities and government securities.
The data shows Lang’ata, Loresho and Spring Valley are leading the latest recovery, with plots in three estates rising by double-digit rates in the year to September, which beat the average 8.34 percent inflation.
Plots in Lang’ata jumped 12.1 percent in the review year to an average of Sh78.9 million an acre, followed by Loresho (11.1 percent to Sh102.8 million) and Spring Valley’s 10.6 percent to Sh237.9 million average asking price for an acre. “Lang’ata remained the suburb with the highest land price growth on higher density development potential, easy access to major economic nodes (CBD, Upper Hill, Mombasa Road) and lower land price per acre compared to neighbouring suburbs,” HassConsult’s report states.
Upper Hill remained the most expensive suburb to buy land with an acre costing as much as Sh550 million despite retreating 1.9 percent in the last 12 months through September.
It was followed by Westlands (Sh520 million an acre), parklands (Sh467 million), Kilimani (Sh440 million) and Riverside (Sh360 million), the HassConsult’s data shows.
Land in most suburbs remains prohibitively expensive, with parcels also subdivided in larger sizes of half an acre and above in most areas.
Availability of land to buy in upmarket suburbs is also limited, partly explaining the marginal price movements in the quarterly surveys. This has pushed investors and prospective homeowners to satellite towns, attracted by improving infrastructure linkages with the city and amenities such as hospitals and schools.
The resultant demand for land in the satellite towns is pushing up prices at a higher rate than in the suburbs.
In the quarter through September, Ongata Rongai posted the biggest growth in the cost of plots among the 14 satellite towns surveyed, with an acre rising 8.2 percent in three months to an average of Sh25.4 million.
The rise was largely on anticipation of “improved access due to the resumption of the dualling of the Bomas-Rongai-Kiserian road”, according to HassConsult. It was followed by Juja where an acre increased 6.3 percent quarter-on-quarter to Sh19.2 million on average, Ngong (4.2 percent to Sh33.4 million), Kiserian (3.6 percent to Sh10.1 million an acre) and Kitengela (3.0 percent to Sh15.6 million).
“Improved road infrastructure has maintained price growth in Ngong, Mlolongo, Athi River Thika and Syokimau by attracting both commercial and residential developers to the satellite towns with the benefit of easing the strain of congestion in the city while providing more affordable housing solutions on the city fringe,” said Sakina Hassanali, head of development consulting and research at HassConsult, wrote in the report.