Land Prices In Kasarani Appreciated 5.7% In 2019/20

The land sector within the Nairobi Metropolitan Area (NMA) recorded an 8-year CAGR of 13.5 percent and an annual capital appreciation of 1.5 percent in 2019/20 according to the Nairobi Metropolitan Area Land (NMA) Report 2020 released by Cytonn Real Estate.

According to Cytonn, the appreciation was higher than the 0.3 percent recorded in 2018/19, attributed to increased demand for land mainly in the low rise residential areas and satellite towns.

During the period under review, transactions in the sector were driven by:

Increased focus on the affordable housing initiative

Development of infrastructure, which has opened up new areas for development

Positive demographics

Reduced supply of development land at affordable prices in areas close to the Nairobi CBD resulting in demand for the same in satellite towns.

The sector was however constrained by; inadequate infrastructure, inaccessibility, and unaffordability of loans and reduced real estate development activities in the wake of the COVID-19 pandemic which has resulted in the disruption of construction materials supply chains and constrained development funding.

“Asking land prices in the low rise residential areas recorded a 3.8 percent capital appreciation y/y, attributed to the availability of development land and growing demand as the areas are sparsely populated, thus offering exclusivity and privacy.

Un-serviced land in satellite towns such as Ruaka also recorded a capital appreciation of 3.8 percent y/y, driven by a growing demand for land in these areas fuelled by the demand for housing by the growing working population as the areas act as Nairobi’s dormitory, coupled by the improving infrastructure,” stated Beatrice Mwangi, a Research Analyst at Cytonn.

“Site and service schemes recorded a 0.5 percent annualized capital appreciation, attributed to increased demand driven by the relatively affordable land at approximately 15 million shillings asking price per acre and provision of infrastructure by the developers.

On the other hand, asking land prices in high-rise residential areas stagnated, and this was attributed to reduced demand for development land due to the relatively high land prices averaging at approximately 116 million shillings per acre.

Asking land prices to low-rise residential areas and un-serviced land in satellite towns averaging at 84 million shillings and 25 million shillings, respectively.

Commercial zones recorded a 0.7 percent y/y correction in asking land prices, attributed to decreased demand for development land in the sub-markets given the relatively high asking land prices of 419 million shillings per acre, on average.

Ruiru, Kasarani, Karen, Spring Valley, and Ruaka were among the best performing submarkets in terms of capital appreciation, recording annual rates of more than 5.0 percent in 2019/20, while Ruiru offers site and service investors the highest expected returns averaging 5.8 percent.

The table below summarizes the performance of the various areas:

“The outlook for the land sector is neutral, with a bias to positively supported by the high demand for development land boosted by affordability in satellite towns, availability of development land, and the improving infrastructure. However, we expect the COVID-19 pandemic to continue impacting real estate development activities thus a resultant sluggish growth in land value going forward,’’ Beatrice concluded.

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