NAIROBI (HAN) January 30, 2016 – Public Diplomacy and Regional Stability Initiatives News. Nairobi’s real-estate market has contributed to the city being named as one of the top 20 successful cities in the world in 2016, even as the sector attracts investors, pushing up the cost of land five-fold.
The City Momentum Index (CMI) of innovative cities compiled by Jones Lang LaSalle, a professional services and investment management company, named Nairobi as an African city that can reinvent itself with the potential of leading in economic growth.
According to the report, Nairobi’s impressive demographic and economic momentum is necessitating the creation of infrastructure and real estate to support the city’s expansion as it registers the highest levels of office and retail construction of any city rated by the index.
Even as the prospects for the city’s real estate sector brighten, the demand for housing is pushing up the prices of land. A recent Hass Consult report released on January 25, showed that investors seeking favourable returns from land are moving to satellite towns as acreage prices in the city rise five-fold to an average of $1.73 million.
According to Hass Consult, the increased appetite for land in Nairobi’s satellite towns is driven by lower average prices per acre at $15,600 even as land prices have more than quadrupled over the past eight years in these areas.
Sakina Hassanali, head of research and marketing at Hass Consult, said that because of the rising demand, land prices in Nairobi’s satellite towns have now tracked similar growth rates to land in Nairobi at 7.5 per cent last year.
“In the fourth quarter of 2015, land in Nairobi’s suburbs rose by nine per cent with Kitisuru, Loresho and Gigiri recording the highest increases in the year at 26.1 per cent, 23.4 per cent and 14.6 per cent respectively.
Spring Valley has the lowest growth in land prices among the city’s suburbs, having recorded a 3.9 per cent drop in 2015 alone,” said Ms Hassanali.
Notably, land prices in Nairobi’s upcoming satellite towns of Kitengela, Kiserian and Athi River (east of Kenya’s capital) are rising faster than those of traditional high-end suburbs of Karen, Muthaiga, Lavington and Runda.
On average, land prices across all suburbs in the city steadily grew, bucking the sluggish economic growth and remaining the number one asset for investors as compared to stocks, bonds or 91-day Treasury Bills.
“Investors are increasingly shifting their focus to land as the stockmarket and other asset classes continue to drop,” said Ms Hassanali.
In terms of returns, a one-acre piece of land in Kitisuru gave investors the highest returns in 2015 with 26.1 per cent growth in price while land in Kiserian to the south of the city accrued 25.3 per cent more in the year.
“To maximise returns, these investors are now buying huge chunks of land for subdivision and resale in Nairobi’s satellite towns. On average, land prices in the satellite towns have risen six-fold and will continue to increase as infrastructural developments like the standard gauge railway near completion,” said Ms Hassanali.
Demand is also high for land in satellite towns, which are ideal for public and private institutions like universities, private schools, hospitals and co-operative societies.
On the rental side, the asking price for high-end residential properties in Nairobi’s affluent neighbourhoods grew at a faster rate in the year to September, pointing to renewed market resilience.
The Knight Frank Prime Global Cities Index for the third quarter — which tracks luxury house prices in local currencies across 34 cities worldwide — showed prices in Nairobi increased by 3.5 per cent in the 12 months to September.
Nairobi’s stronger sale price growth has for the first time outperformed the global average of 1.9 per cent over the same period, which is also five times the growth registered two years ago.
According to the Knight Frank index, the asking prices went up 1.1 per cent, with Nairobi climbing up to position 14 in the ranking, up from 26th in January last year.
Ben Woodhams, the managing director of Knight Frank Kenya, said that while it was taking longer to close deals, there was a growing interest in the properties on offer.