Economy

Land, house prices rise at fastest pace in years

city

A section of the industrial area in Nairobi as viewed from the UAP Tower located on Upper Hill road on July 4, 2016. PHOTO | SALATON NJAU | NMG

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Summary

  • Data by realtor HassConsult show that on average a house now costs 3.1 percent more in the city, from drops of 0.20 percent last year and 3.5 percent in 2019.
  • This is the fasted increase since 2018 when the growth stood at 8.5 percent, reflecting property market recovery from Covid-19 economic hardships.
  • 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 loss as people lost jobs.

Land and house prices in Nairobi increased at the fastest pace in two and three years respectively, on the back of renewed demand from buyers who had slowed down acquisitions in 2020 amid Covid-19 economic hardships.

Data by realtor HassConsult show that on average a house now costs 3.1 percent more in the city, from drops of 0.20 percent last year and 3.5 percent in 2019.

This is the fasted increase since 2018 when the growth stood at 8.5 percent, reflecting property market recovery from Covid-19 economic hardships.

Land prices in the city rose by an average of 1.16 percent from a drop of 2.56 percent in 2020 at the peak of the pandemic while the cost of plots in satellite towns such as Kitengela and Juja rose faster than those in the suburbs, fuelled by demand from those looking to build their own homes affordably.

The cost of land in these satellite towns on average rose 6.65 percent compared to a drop of 1.1 percent in 2020, making it the fastest growth in more than seven years.

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 loss as people lost jobs, cautious lending by banks, and investors choosing to keep their cash in hand as they rode out the economic uncertainty.

The economy grew by eight percent last year, as per estimates by the Central Bank of Kenya (CBK), reversing the contraction of 0.3 percent seen in 2020. Real estate grew by five percent in the period, up from 4.5 percent in 2020.

In 2020 the economy was hammered by the effects of Covid-19, which slashed tourist flows into the country.

The price of a quarter acre in Kiserian rose 19.17 percent to Sh2.3 million from Sh1.93 million in 2020, while in Juja it jumped 14.3 percent to Sh4.15 million from Sh3.63 million.

In Athi River, land sellers raised their price for a quarter-acre by 14.4 percent to Sh3.95 million from Sh3.48 million in 2020, while Syokimau’s price went up 10 percent from Sh5.45 million to Sh6 million.

“In the towns, Kiserian posted the strongest growth annually with asking prices increasing by 19 percent. Kiserian town’s low entry point relative to its peers continues to make it attractive to speculators,” said Sakina Hassanali, HassConsult’s head of development consulting and research.

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 Spring Valley had the biggest gain of 10 percent with an acre selling at Sh191.9 million from Sh174.5 million in 2020.

Langata followed with a gain of 6.1 percent, from Sh63.7 million an acre in 2020 to Sh67.6 million last year, while Nyari’s price per acre rose by 5.9 percent to Sh111.8 million.

Riverside, Loresho and Donholm led in price fall, shedding Sh14.4 million, Sh3.4 million and Sh1 million to Sh329.5 million, Sh84.5 million and Sh69.8 million per acre respectively.

An acre in Upperhill is the most expensive in the city at Sh509.7 million, followed by Westlands and Kilimani at Sh423.4 million and Sh413.1 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.

Following a contraction of 0.3 percent in 2020, the economy grew by 0.7 percent in the first quarter of this year and 10.1 percent in the second quarter.

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 that last year, 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.

These types of houses saw their prices go up by 5.9 percent, outperforming semi-detached units whose asking price was up by 0.5 percent, and apartments that dropped by 3.4 percent.

Langata recorded the biggest gain in average house prices last year at 14.1 percent to Sh32.6 million, with Loresho following at 7.9 percent to Sh54.2 million.

“Whereas slightly more than half of the advertised properties were detached houses in 2001, today they make up around 9.5 percent of the market and this limited supply of units is sustaining buyer demand and prices,” said Ms Hassanali.

Infrastructure developments and constraints have also emerged as a major factor in the growth of land and house prices in the city.

Areas such as Langata, Juja and Syokimau, which have enjoyed improvement in road access, have recorded better price gains for both land and houses, while others such as Kilimani and Riverside, where existing water and sewerage utilities are being strained by highrise developments, have seen prices suffer.

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