Land is top option for investors, next is cattle

Houses in an upcoming development. Land prices have increased by more than 500 per cent over the last seven years. [PHOTO:WILBERFORCE OKWIRI / STANDARD]

Nairobi,Kenya: Land, especially in Nairobi, continues to be the leading investment venture ahead of cattle, gold and crude oil.

This is following a rise in prices by 17.6 per cent in the first quarter of this year and 4.5 per cent in the previous quarter, which is 5.5 times greater than in December 2007.

According to the 2015 HassConsult Property City Index for Nairobi’s 18 suburbs, prime land has seen an increase of 557 per cent in prices over seven years.

This is in the high-development-activity suburbs of Karen, Kileleshwa, Kilimani, Lang’ata, Lavington, Runda, Spring Valley, Upper Hill and Westlands.The increase in land prices was attributed to infrastructure development projects.

According to Sakina Hassanali, head of research at HassConsult, investors are looking for areas with high development and not just buying land anywhere as was the case initially.

Average prices of land in these high-development areas have shot from Sh33 million in December 2007 per acre to Sh181 million in March 2015.

According to Stanlib, an investor who invested Sh32.4million at the end of 2007 would have been worth Sh181million by the end of March 2015, if he invested in Nairobi’s prime land.

Highest returns

”Current trends affirm that the highest returns come from being ahead of the curve and spotting the next area to rise, rather than buying into areas that are now well advanced on the development curve,” said James Muratha, regional director at Stanlib.

Donholm is a medium-development-activity area with lower land prices. An acre goes for an average price of Sh41million while Parklands continues to be the highest priced at Sh384million. On the other hand, the asking price for detached houses fell by 1.6 per cent between January and March, compared with the previous year.

”We can ... expect some slowdown in the growth of property closure prices in the second quarter. However, we believe this is a temporary stay, caused by some slowing of inquiries and offers in the final quarter of last year, and expect further price growth in the market ahead,” said Sakina Hassanali, head of research, HassConsult.

On the rental side, there was also some slowdown in asking price in the first quarter, driven primarily by the asking rents for apartments, up 0.4 per cent on the previous quarter.

”With construction of new properties this year and next year concentrated heavily in apartments, we foresee ample supply in this segment in 2015-16, but some shortening of supply for semi-detached houses, which could drive further repricing,” said Hassanali.