Apartments’ rental prices in all satellite towns increased in the first quarter of 2023 owing to an increased demand for affordable houses and inflationary adjustment to prices.
The HassConsult’s Hass Property Index showed that Ongata Rongai (5.9 per cent), Thika (5.7 per cent) and Kiambu (5.3 per cent) led this resurgence as apartment rental prices in suburbs mainly went the other way.
Nairobi land prices, the report indicated, also “touch(ed) a historic high of an average Sh194 million per acre”, with Ruaka the most expensive suburb.
As such, apartments located in satellite towns recorded average rental returns of 3.4 per cent over the quarter and 9 per cent annually, said the HassConsult report.
Nearly all towns posted positive growth in apartment rental pricing, “highlighting the increasing occupancy rate of apartments targeted at renters with a monthly budget between Sh25,500 and Sh50,000”.
“This trend is being further boosted by the underperformance of other asset classes such as bonds, equities, and fixed deposits, making these apartments an attractive investment option,” said Sakina Hassanali, Head of Development Consulting and Research at HassConsult.
Over the quarter, semi-detached houses’ sales prices dropped by 2.4 per cent as demand continues to wane, the report indicated.
“In contrast, apartments and detached houses on their part saw prices slightly increase by 0.8 per cent and 0.7 per cent. These increases in prices can be attributed to inflation adjustments in prices coupled with sustained demand, particularly for detached houses,” the report said.
HassConsult also said that over the last 20 years, demand has outpaced supply for detached houses resulting in an increase in sale prices.
“It is worth noting that detached homes now account for only 7.5 per cent of the market, down from 28 per cent in 2016 and over 50 per cent in the early 2000s, while apartments’ market share grew to 64.4 per cent and semi-detached homes increased to 28.1 per cent during the same period,” said Ms Hassanali.
The average sales price for detached houses has reached Sh48.7 million, while semi-detached homes are currently selling for Sh30.2 million, HassConsult said. The average sales price for apartments is Sh15.07 million.
The rental market experienced a decline of 0.5 per cent on average over the last quarter, and a decrease of 1.2 per cent over the past year.
Nairobi land prices remained stable with a slight increase of 0.3 per cent over the quarter, indicated the Hass Land Index.
“... attributable to sustained confidence in Nairobi’s land market which has resulted in the average prices of land in Nairobi reaching an average price of Sh194 million per acre, the highest rate the market has experienced,” said the report.
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“A renewal of development activity has been the driving reason for land price recovery and 10 out of 18 Nairobi suburbs now have prices above their pre-pandemic rates,” said Ms Hassanali.
Donholm, Kitisuru, Langata, Loresho, Muthaiga, Nyari, Ridgeways, Runda, Spring Valley, and Westlands suburbs’ land prices have increased above their pre-pandemic rates.
Despite prices in the above suburbs exceeding their pre-pandemic levels, there was some “cooling” in Kitisuru, Nyari, and Gigiri.
“These areas, which are highly desirable suburbs for foreign officials and expatriate staff, have experienced a slight dip in land prices. These suburbs corrected this quarter after several quarters of heated pricing on expansion of Kenya’s diplomatic zone,” said Ms Hassanali.
Land prices in Nairobi’s satellite towns increased by 1.28 per cent over the quarter continuing their trend of higher appreciation rates compared to similar parcels in the city.
HassConsult attributed this to the towns’ affordability and improved infrastructure, which have made them increasingly attractive to potential investors. Year-on-year growth shows land prices in the satellite towns increased by 8.08 per cent compared to a 1.42 per cent annual increase in land prices in the city.
“The proposal to extend the Standard Gauge Railway to Athi River’s Export Processing Zone has sparked speculation and led to a 6.1 per cent increase in land prices over the quarter. This growth rate is comparable to Ngong, the best-performing town, which witnessed a 6.2 per cent surge in land prices,” the study showed.