Increased Property Value Drives Growth of Rental Yields in Nyeri County
By Soko Directory Team / Published February 25, 2019 | 7:21 am
The real estate sector in Nyeri has improved to an average rental yield of 5.1 percent for the residential sector from 4.1 percent in 2017 as a result of continued increase in the property value fuelled by demand and a general increase in economic activities.
According to the weekly Cytonn Report by Cytonn Investments, there was a slight decline in the commercial sector to 12.1 percent, from 13.5 percent in 2017, and a growth in capital appreciation to 19.1 percent, from 17.3 percent recorded in 2017.
Factors Driving Real Estate Investment in Nyeri
Nyeri is primarily an agricultural area, but over the last 5-years, the area has witnessed increased real estate activities in the town and its environs driven by devolution, Mt. Kenya Regional Headquarters, relatively high income, tourism, the growth of Small and Medium Enterprises (SMEs) and improving infrastructure.
Challenges Facing Real Estate in Nyeri
Despite the above factors supporting the real estate sector in Nyeri, the market continues to face challenges, which include;
- Lack of Structured Planning Regulations – The County currently lacks structured planning regulations outlining areas zoned for commercial, residential and special needs. This is likely to lead to urban sprawl in urban centers and thus reduced land use maximization. The County Government is, however, working on setting up zoning regulations to formulate land use standards, zoning schemes and ordinances for all urban settlements in the county,
- Inadequate Infrastructure – Most of the access roads in the county are earth roads making the areas they serve difficult to access during the rainy season, while the drainage systems in the town are not well maintained thus making the area unattractive to investors resulting in the slow growth of real estate,
- Unavailability of Development Land – Availability of land for development in Nyeri Town has been low thus resulting in relatively high land prices of up to 120 million shillings per acre in the CBD, compared to that in the outskirts at approximately 10 million shillings per acre. In addition, ownership of ancestral land has resulted in minimal land sales as people have a sentimental attachment, thus leading to slow investment growth, and,
- Demand for Residential Units – Most of the prospective home-owners in Nyeri prefer to build their own houses. As a result, the build for sale model is still underdeveloped with the National Housing Corporation (NHC), probably being the only institutional developer. Given the fast uptake of these units with an annualized uptake of 23 percent having started selling in 2014, we expect the market to eventually embrace the model in the coming years.
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Comparing across the five counties tracked by Cytonn Investments, yields are generally similar across all counties in the residential sector, with Kisumu recording the highest at 5.2 percent, followed by Nyeri and Mombasa at 5.1 percent. Nakuru County recorded the lowest at 4.2 percent.
For commercial property, Nyeri recorded the highest rental yield of 12.1 percent, while Kisumu, Nairobi, Mombasa, and Nakuru recorded yields of 9.2 percent, 8.3 percent, 6.7 percent, and 6.5 percent, respectively.
According to Cytonn, this is an indication that Nyeri offers a better investment opportunity for the commercial property when compared to the other four regions due to the low supply of quality office spaces in the market.
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