Land prices in Nairobi outpace pre-pandemic levels

By Remie OTIENO

Land prices in Nairobi remained stable with a slight increase of 0.3 per cent in three months to March 2023, according to the latest HassConsult index, with new prices averaging Sh194 million per acre – the highest peak yet.

Kenya’s housing market, which has been the epicenter of a tough economic downturn since the emergence of Covid-19, is now expected to remain a bright spot amid a sharp slump as other challenges like inflation-beating projections and depreciating Shilling continue to wreak havoc.

The realtor attributed the impressive growth to the affordability and improved infrastructure within Nairobi, making prices increasingly attractive to potential investors.

Year on year growth shows land prices in the satellite towns increased by 8.08 percent compared to a 1.42 percent annual increase in land prices the city with similar increases in Nairobi’s satellite towns soaring by 1.28 percent over the quarter.

“A renewal of development activity has been the driving reason for land price recovery and 10 out of 18 Nairobi suburbs now have prices above their pre-pandemic rates,” said Sakina Hassanali, Head of Development Consulting and Research at HassConsult.

Noting the proposal to extend the Standard Gauge Railway to Athi River’s Export Processing Zone has sparked speculation and led to a 6.1 percent increase in land prices over the quarter.

“This growth rate is comparable to Ngong, the best performing town, which witnessed a 6.2 percent surge in land prices,” noted Hassanali.

Areas such as Donholm, Kitisuru, Langata, Loresho, Muthaiga, Nyari, Ridgeways, Runda, Spring Valley, and Westlands suburbs have increased above their pre-pandemic rates.

Despite prices in the above suburbs exceeding their pre-pandemic levels, HassConsult highlights a few pockets of cooling in Kitisuru, Nyari, and Gigiri – areas that are highly desirable suburbs for foreign officials and expatriate staff, have experienced a slight dip in land prices.

“These suburbs corrected this quarter after several quarters of heated pricing on expansion of Kenya’s diplomatic zone,” said Hassanali.

Meanwhile, the rental market has on the hand experienced a decline of 0.5 percent in average over the last quarter, and decrease of 1.2 percent over the past year, with nearly all towns posting positive growth on apartment rental pricing.

This means during that period, there has been increasing occupancy rate of apartments targeted at renters with a monthly budget between Sh25,500 and Sh50,000.

The demand for affordable rental properties, particularly apartments in satellite towns, has impacted the overall returns.

“This trend is being further boosted by the underperformance of other asset classes such as bonds, equities, and fixed deposits, making these apartments an attractive investment option,” added Hassanali.

Until today, the local housing demand, highly sensitive to mortgage rates, has steadily declined since the pandemic hit in 2019.