Columnists

How Expressway will impact the real estate sector

expressway

Ongoing construction of the Nairobi Expressway along Uhuru Highway. PHOTO | DIANA NGILA | NMG

The Nairobi Expressway is scheduled to be completed by the second quarter of 2022, opening up Mlolongo, Syokimau, Athi River and other satellite towns.

While the main aim of the project is to ease traffic congestion on Mombasa Road and create a direct route between the Jomo Kenyatta International Airport and Westlands, the line is something more than just a super-highway.

It will have an impact on other sectors such as the real estate.

The immediate impact of the Nairobi expressway will be on the price of properties surrounding it. In the past, we have witnessed land prices appreciate as a result of improved infrastructure.

Property prices will continue appreciating as the Nairobi Expressway nears completion and after.

However, prices will rise up to a certain level and then plateau.

Furthermore, real estate owners have started making money thanks to the Nairobi Expressway, if we are to go by the Cytonn Report on the Athi River Investment Opportunity.

The report states “For detached units, the trend is reversed with rental yields averaging at 4.9 percent against an average price appreciation of 7.9 percent, indicating that the clients for this typology are more buyers than renters.

“The typology records total return of on average 11.7 percent higher than the three-bedroom apartments as they have more privacy and larger unit sizes. For a development positioned properly the total returns can be as high as 23.2 percent and hence a good investment opportunity”.

We should also expect to see a number of new commercial developments coming up along the expressway, as it is inevitable that when transport systems in an area begin to improve, so does the number of amenities.

Even with insufficient literature on the determinants of real estate asset values in Kenya except research reports and articles that focus on trends, prices, demand, supply and mortgage rates in the real estate sector, the relationship between infrastructure development and real estate values in Kenya is quite evident.

Components like transportation, social amenities, education infrastructure, commercial developments, and telecoms greatly impact real estate investments and development decisions in towns around the country.

This is because people are likely to buy or rent properties in areas that are livable and easily accessible. Home buyers, are always on the lookout for developed infrastructure in proximity to their desired residential property or real estate investment. A developed neighbourhood assures a buyer their investment will appreciate.

What an expressway does, then, is to restore or bring about all the advantages of accessibility to developers, investors, and residents.

The underlying fact is that there is an effect of infrastructure development on real estate pricing. Areas with strategic development programmes attract investors who are hoping to cash in on ambitious development programmes, hence pushing the prices higher.