Investors cautious as Upper Hill land prices dip five years in row

View of upper hill tall buildings seen from Westlands aerial view. [David Gichuru, Standard]

Land prices in Nairobi's Upper Hill area dropped yet again, sustaining a trend since July 2018, HassConsult said in its Land Price Index Quarter Three (Q3) report.

Oversupply of commercial space in the area has seen developers shy away from investing in new space, a "wait-and-see" attitude as they wait for units in the suburb to get sold and vacancy levels to improve.

The area recorded a 0.6 per cent drop over the quarter. "Upper Hill continued stagnation is assigned to the office market oversupply in the area that will not see new commercial buildings come through until demand catches up with supply," said Ms Sakina Hassanali, Head of Development Consulting and Research at HassConsult.

Generally, land prices in the city's 18 suburbs remained stable with a modest 0.8 per cent drop over the quarter, HassConsult said. Spring Valley's 6.6 per cent change was the biggest gain, with Nyari's 0.9 per cent slide the biggest loss. Suburbs such as Nyari "experienced a modest price correction, reversing previous quarterly price improvements", said the real estate firm. In the satellite towns, land prices continued to improve, registering a 1.6 per cent growth over the quarter.

Improved infrastructure, which is making towns in the area more accessible, is resulting in investor demand for land in these areas including developers.

"Syokimau town, for instance, is now more accessible following the opening of the Nairobi Expressway over the quarter. The town was the best performer over the quarter with prices increasing by 6.8 per cent. Syokimau was also the best performing town annually with prices improving by 20.1 per cent," Hass Consult said.

HassConsult noted that Juja town continues to touch new highs after the average price for an acre touched a historic Sh18.8 million price.

"Juja has benefitted from road infrastructure and investors getting drawn to develop housing and affiliated property for higher education centres located in the area," it said. Property prices recorded a 0.8 per cent quarterly price growth which HassConsult attributed to the detached housing segment which recorded a 1.5 per cent growth.

The apartment sales market stagnated, with prices slightly falling by -0.3 per cent over the quarter.

Detached houses, including townhouses and villas, maintained demand, with the price growth of these units, especially in Loresho and Juja where house prices increased by 3.6 per cent and 5.1 per cent respectively.

Donholm houses

Rents dropped slightly by 0.2 per cent over the quarter, reflecting the challenging economic environment.

Rent price growth was strongest for houses located in both suburbs and towns. Donholm houses commanded the strongest asking rents at 2.6 per cent while houses in Ruiru saw the highest rent increases at 6.4 per cent.

Apartments prices in Riverside dropped by four per cent over the quarter while apartments in Thika dropped by three per cent.

On the rental front, prices across the board declined by 0.2 per cent reflecting the tough economic environment.

"We are in a price-sensitive market and owners are taking the hit to sustain sales. Despite this, projects that have excessive demand are increasing prices in line with inflation. These projects include townhouses and villas in high-end areas," said Ms Hassanali.