Home prices in Nairobi and land costs in satellite towns around the capital have risen to new highs on the back of renewed demand from buyers who had slowed down acquisitions at the peak of Covid-19 economic hardships.
Data by realtor HassConsult show the price of an average house within the city rose 6.8 percent in the year to March compared to a drop of 1.8 percent in the same period a year earlier.
This is the fastest increase since 2018 when the growth stood at 8.5 percent, reflecting property market recovery from the effects of the Covid-19 pandemic.
Land prices in Nairobi rose by a marginal 1.07 percent and recorded a jump of 7.35 percent in the satellite towns such as Kitengela and Juja, compared to a growth of 0.58 percent in the year to March last year.
The growth in the cost of plots in the satellite towns was the fastest in five years, a reminder of the days when the property craze saw coffee plantations in the Nairobi suburbs uprooted to pave the way for gated housing estates and shopping centres.
Real estate was among the worst-hit sectors by the economic fallout of the pandemic as orders by new house buyers dried up, largely due to income and job losses, cautious lending by banks, and investors choosing to keep their cash in hand as they rode out the economic uncertainty.
The sector had been one of Kenya’s fastest-growing in the decade to 2015, with returns outpacing equities and government securities.
“Over the quarter, Thika, Juja, and Ruiru towns continued to sustain investor demand, which was reflected in land asking prices increasing by 6.3 percent, 4.6 percent, and 1.6 percent respectively,” said Sakina Hassanali, the head of development consulting and research at HassConsult.
This came on the back of the rebound in Kenya’s economy last year, growing at the fastest pace in 11 years on easing of Covid-19 restrictions.
The growth boosted recovery in key sectors, excluding agriculture whose activities were hit by poor rainfall.
The price of an acre in Kiserian rose 16.6 percent to Sh9.4 million from Sh8.06 million in 2020, while in Juja it jumped 17.5 percent to Sh17.4 million from Sh14.8 million.
In Athi River, land sellers raised their price for an acre by 4.86 percent to Sh15.1 million from Sh14.4 million in 2020, while Syokimau’s price went up 11.3 percent from Sh24.6 million to Sh22.1 million.
Land in most suburbs remains prohibitively expensive, however, costing as much as Sh409.4 million and Sh389.9 million per acre in Kilimani and Parklands respectively.
Availability of land to buy in upmarket suburbs is also limited, and parcels are also subdivided in larger sizes of half an acre and above in most areas.
Price gains were therefore limited in the suburbs, where Muthaiga had the biggest gain of 6.5 percent with an acre selling at Sh197.8 million.
Langata followed with a gain of 6.3 percent, from Sh68.5 million, while Kitusuru’s price per acre rose by 6.1 percent to Sh95.4 million.
Riverside, Loresho and Donholm led in price falls, shedding 2.3 percent, 2.0 percent and 3.6 percent to Sh330 million, Sh86.1 million and Sh68.9 million per acre respectively.
An acre in Upper Hill is the most expensive in the city at Sh499.9 million, followed by Westlands and Kilimani at Sh435.5 million and Sh406 million respectively.
The recovery of the economy has also helped house prices go up as more people who lost jobs in 2020 return to gainful employment and businesses regain their footing.
This rebound has given house buyers the confidence to invest in real estate, while developers are also able to move ahead with projects that they had put on ice due to the prospects of a revival of the rental market.
In Nairobi’s satellite towns, however, house sale price gains have been more modest, largely because most people settling in those areas prefer to build their own units.
HassConsult said the house sale market was largely driven by higher demand for detached units, whose supply in the market has fallen in the past two decades.
Langata recorded the biggest gain in average house price at 11.2 percent to Sh33.2 million, with Spring Valley and Loresho following at 9.1 percent to Sh71.3million and 7.5 percent to Sh55.7 million.
Home prices dropped in Runda and Muthaiga by 2.5 percent to Sh93.3 million and 0.8 percent to Sh82.9 million.
Infrastructure developments and constraints have also emerged as a major factor in the growth of land and house prices in the city.