Housing developers flock city outskirts

Sakina Hassanali Head of Development Consulting & Research Hass Consult. Hass Consult unveiled land price trends revealing that investors have adopted a cautious approach towards investing in Nairobi's Donholm suburb which has seen prices in the area drop by 2 per cent in the quarter. [Wilberforce Okwiri/Standard]

Real estate developments on the outskirts of Nairobi have become new havens for property investors even as prime areas of the city face declining prospects due to a glut.

A local real estate firm has found in its latest report that advertised land prices in the city over the last two quarters have increased only marginally as satellite towns surge ahead.

The survey by HassConsult found that land prices in Nairobi increased by only 0.6 per cent in the second quarter as its outskirts took the limelight with a 3.2 per cent increase over the same period.

The company said prices in high-end places such as Upper Hill have cooled off as developer demand down owing to looming oversupply.

“Upper Hill still has the most expensive land at an average of Sh550 million per acre, but demand has eased due to the huge stock of commercial and residential units and those in the pipeline,” said HassConsult head of Development and Research Sakina Hassanali.

Satellite towns with land below Sh15 million per acre recorded the strongest growth over the second quarter, led by Kitengela at 8.18 per cent. 

Juja, for instance, touched a record high with prices 16 times higher than 2007, the highest increase in any suburb since the Hass Property Index was launched.

“Prices below the Sh15 million mark are attractive as investors see that there is still a window for appreciation over the long-term. This price level is below the satellite town average of Sh21.5 million per acre,” said Ms Hassanali.

The only exception were places such as Tigoni, Kiambu and Donholm which are increasingly becoming unattractive to investors.

Hassanali said some investors are now shying away from Kiambu and Tigoni due to prohibitive land prices where the two towns recorded the lowest price drops over the quarter at 1.9 per cent and 1.1 per cent respectively.

The survey, however, found that even as land prices have gone down seven fold, Donholm was being undone by increasing incidents of fraud. As a result, the area is experiencing a dearth of investors owing to negative sentiment.

“Following the announcement by the National Lands Commission that it was yet to determine the validity of disputed plots in the area, it has seen investors shy away until there is clarity,” said Hassanali.