High land prices push investors to low-end frontiers

Rising land prices in most Nairobi suburbs have pushed investors to middle and lower income areas. Experts in the property market say Nairobi City has been left to the super rich while middle income and lower income earners move to areas far away from the city.

The trend has also led to increase in land prices in emerging settlements such as Kitengela, Isinya, Machakos, Thika, Ruiru, Kiserian and Ngong. Others are Kikuyu, Kiambu town, Juja and Naivasha. They are now the new homes to most residents working in the city. Land in these areas ranges between Sh200,000 to Sh10 million per 50x100 feet plot.

University of Nairobi Real Estate and Construction Management Lecturer Catherine Kariuki says the trend on the property market has shifted, with more activities now taking place in far-flung areas. This has seen landowners prefer commuting daily to the city centre for work and other issues rather than staying in the high-priced city.

“Even though the current prices of land in Nairobi and its environs are beyond the reach of the majority of Kenyans, they have created an avenue for more development in the urban centres outside Nairobi,” said Ms Kariuki. “Further, devolution has assisted in setting the new development pace by improving infrastructure.”

Investment classes

Last week, Property firm Hass Consult and Stanlib Investment Managers in a new property report said land in Nairobi has appreciated five-fold in value, in seven years, outperforming all other investment classes.

The report revealed that an acre of land in Nairobi is selling at an average of Sh173.7 million, up from Sh32.4 million in 2007. “The galloping land prices in the city are driven predominantly by commercial and residential developments,” said Stanlib Chief Investment Officer Kenneth Kaniu.

The report noted that UpperHill, which was until the early 2000s a residential area, was found to be the most expensive with an acre selling at Sh470 million. Other costly suburbs are Kilimani at Sh371 million an acre, Westlands (Sh361.7 million), Kileleshwa (Sh250 million), Lavington (Sh202 million), and Spring Valley Sh173 million an acre. “Even as the prices of land continue to rise in the city for the last seven years, we have also witnessed a number of movements by investors as they seek land and property in middle and lower income areas. For example, the dormitory areas of Nairobi such as Kiambu, Machakos, Ngong, Kikuyu, Kitengela, Ruiru, Juja, Thika and Naivasha,” said HassConsult Head of Research and Marketing Sakina Hassanali.

Land Development and Governance Institute Chairman Ibrahim Mwathane says property prices in Nairobi are unrealistic. “Paying close to half Sh1 billion for an acre which I believe could be higher than in many cities in developed economies in a third world economy like Nairobi is unrealistic,” said Mr Mwathane.

“We must find ways of rationalising and stabilising the runaway property prices in Nairobi and Mombasa soonest. With those kind of prices, it takes super investment, with super tenancy to recoup initial business capital.”