Infrastructure Development has led to Land Appreciation in Kiambu County -Cytonn Report

Ruaka town recorded a 125.0 percent land price appreciation over the last one year due to infrastructure development in Kiambu County, According to the Land Index Report by Property Reality Company (PRC),

The report further noted that the construction of the Northern Bypass 4-years ago and increased housing development have also contributed to land appreciation in the county of Kiambu. However, land prices in the rest of Kiambu appreciated 3.0 percent over the same period.

Other satellite areas such as Kiserian and Utawala also recorded rapid land price appreciation of 42.0 percent and 32.0 percent, respectively. At the same time, the land prices rose moderately in the rest of satellite areas and recorded price stagnation only in Kamulu and Malili towns.

The report indicated that the demand for land in satellite towns has also been boosted by an increase in financing options, and the demand is set to increase significantly due to the incentive offered by the law capping interest rates. The key take outs from the report are:

1. Ruaka, Kiambu, Kikuyu and Syokimau have the highest relative prices of land due to proximity to Nairobi while Joska, Isinya and Kiserian recorded the lowest average prices as shown below;

1. Most property sold have access roads and are fully beaconed with electricity & water on site to increase their value,
2. Access to finance is the key setback to land investors. Only 24% of real estate companies have financial partners providing financing to clients for their products, and,
3. 0 percent of the real estate companies allow installment payments and discounts on either bulk or cash purchases.

Cytonn Investments weekly report noted that the PRC report is just in line with the recently released report dubbed “Property Price Index for Q3’ 2016” by Hass Consult, which indicated a 21.4 percent land price appreciation for the satellite towns of Nairobi.

According to the report, land prices in satellite towns are growing at a tremendous rate and there is no expectation of a decline in the short to medium term. In our view, the land in satellite towns in Nairobi are an attractive investment due to high capital appreciation and increase in demand due to increase in middle class income earners buying land for home ownership mainly in satellite towns to avoid congestion in Nairobi suburbs. 

Cytonn further stated that over the week, the Tourism Regulatory Authority ranked over 80 hotels, with only 30 establishments qualifying for star ratings. The report indicated that the number of hotels with five- star rating have doubled to 15-hotels following the previous ranking exercise that had identified 7 five-star hotels in exclusion of Nairobi area. The hotels classified under five-star rating were Villa Rosa Kempinski, Hemingways Nairobi, Sankara Nairobi, Fairmont The Norfolk, The Sarova Stanley, Radisson Blu Hotel, Dusit D2 and Tribe Hotel, while ten hotels were ranked four – star, six were ranked as three -star and six were ranked as two-star hotels in Nairobi.

The classification and rating of hotels was mainly through the following criteria;

1. Quality of facilities
2. Quality of the location
3. Rooms and Conference sizes
4. Quality of the décor and
5. Linguistic diversity of the staff among others

This ranking of the hotels and restaurants brings about various advantages and differentiation of hotels. The key advantages being hotels peg their facilities pricing on the rating, and the rating is used as the marketing tool since international guests rely on these international standards classifications when booking for hotel services.

The increased number of five-star hotels in Nairobi is mainly informed by the intensive investments in the hospitality sector over the last five-years. We remain positive on hospitality sector performance and investment in Nairobi, since the opportunity in this market lies in Maasai Mara followed by Nairobi area, which offers high returns to investors as per the Cytonn Hospitality Report, boosted mainly by MICE tourism, and the growing eco-tourism and health tourism involving environmental conservation.

Read more about this in the Cytonn Report here.

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