Report on Nairobi property index shows buyers are shifting focus to satellite towns.
Athi River has experienced the sharpest property appreciation in the larger Nairobi over the last seven years, a report by Hass Consult has indicated.
The land index by Hass Consult and Stanlib Investments, which now includes 14 satellite towns in addition to 18 suburbs in Nairobi County, shows Athi River has had the hottest property market since 2007.
The index shows that on average an acre in Athi River was priced at Sh11.1 million in 2014, up from Sh1.285 million in 2007, as a result of new roads, sewer lines and other infrastructure projects.
“It is clear that as infrastructure has developed in Nairobi, specifically the upgrading of major roads, so have the satellite towns that are connected by them,” said Hass Consult head of research Sakina Hassanali. “Over seven years, Athi River posted the highest rises, experiencing an 8.64 fold increase followed by Juja, at 7.83 fold.”
The 8.64 fold land price increase in Athi River has slightly edged out Upper Hill as the fastest appreciating property market.
The first quarter land index, which did not include satellite towns, ranked Upper Hill as the hottest market with an 8.22 fold price increase over the last seven years. The area has the most expensive property with an acre on average going for Sh493 million.
Ruaka had the most expensive property prices amongst satellite towns with the average price of an acre going for Sh56.6 million. Kiambu, Kiserian, Kitengela, Limuru, Mlolongo, Ngong, Ongata Rongai, Ruiru, Syokimau, Thika and Tigoni are the other satellite towns covered in the larger Land Index.
On average prices in the satellite towns rose by 6.17 times between 2014 and 2017 while prices in Nairobi suburbs increased 5.59 times over the same period.
Suburbs in Nairobi are, however, expected to outpace satellite towns in property price appreciation and developer interest in coming months as the effect of increased interest rates begins to trickle down to the market.
The Central Bank of Kenya has increased the policy rate to 11.5 per cent from 10 per cent and Kenya Banks' Reference Rate has subsequently risen to 9.87 per cent from 8.54 per cent.
Ms Hassanali said the effect would be felt in satellite suburbs where more purchases are financed by debt rather than cash. Reduced demand should see developers moving to suburbs where most sales are on cash basis.
“The knock-on effect will be that developers will move to places where there is stable demand,” she said.
However, fund managers say the property market still has the best returns when compared with other investment classes such as bonds and stocks.
“Current data highlights real value areas with upcoming development potential and affirm that strong returns continue in selected mature suburbs. Research and data are critical to successful property investment,” said Stanlib chief investment officer Kenneth Kaniu.
The Nairobi Securities Exchange, on the other hand, closed at 160.2 points on Wednesday which is the lowest for the year.
Rising interest rates are also expected to see bond prices sliding.