Land speculators burn their fingers in Kiambu
HOME & AWAY
By Wainaina Wambu | February 4th 2021
The chickens have come home to roost for property owners in Kiambu County.
After years of speculative buying and hoarding, investors have found themselves stuck with vast parcels but no buyers to match their exaggerated prices.
Popularly referred to as ‘Nairobi’s bedroom’, Kiambu has witnessed a property rush over the years that saw the clearance of coffee and tea plantations to make way for houses, turning into a concrete jungle of apartments, gated estates, shopping malls and industrial warehouses.
This has seen areas such as Ruaka rise to have the highest land prices in all Nairobi’s satellite towns, with an acre fetching an average of Sh90.2 million, according to the latest figures by property firm HassConsult.
Kiambu County accounts for half of Nairobi’s satellite towns, with the average price of an acre in the seven satellite towns ranging between Sh14.5 million to Sh90.2 million, shows the 2020 fourth quarter Hass Land Index.
Ruaka is followed by Kiambu Town at Sh38.6 million per acre, Ruiru Sh24.9 million, Tigoni at Sh24.4 million, Limuru Sh22.8 million and Juja at Sh14.5 million.
Satellite towns are located next to major cities and are grown by an emerging middle class and investors seeking less expensive land outside the capital.
This boom has also roped in other areas that used to be farmlands such as Kajiado, Ngong, Kitengela and Athi River.
Latest figures from HassConsult show that Kiambu accounted for the biggest annual drop in land asking prices, experiencing a significant price correction.
The speculation was driven by insurance companies, savings and credit societies (Saccos), land buying companies and other investors who now find themselves stuck with high volumes of un-serviced and subdivided plots that they cannot offload in the current property market.
HassConsult Head of Development Consulting and Research Sakina Hassanali said land prices in Kiambu County were moving towards a “maximum” limit, attributing the property rush partly to the government’s mega-infrastructure upgrades.
“Kiambu County has in the last decade seen the most intense development in infrastructure, which put the county into a bracket of investment that was in a league of its own - attracting institutional investors such as insurance companies, Saccos and real estate developers who bought large parcels of land for subdivision and further speculation,” she said.
“However, land prices in the county are moving towards a maximum of what the development market can bear, until we see a hike in economic activity and therefore some space for property prices to rise further.”
Ms Hassanali spoke during the release of the 2020 Fourth Quarter Hass Property Index and Nairobi Land Price Index.
The index includes quarterly changes in asking and letting prices in 18 Nairobi suburbs and 14 satellite towns.
Six of Kiambu Countyis seven towns recorded a drop in land asking prices. They are Kiambu Town, Ruiru, Limuru, Thika, Juja and Ruaka.
Kiambu Town, Ruiru and Limuru witnessed the biggest annual drops of 11.4 per cent, 6 per cent and three per cent respectively after years of speculative activity backed by massive infrastructure upgrades.
Tigoni, where an acre averages about Sh24.4 million, was the exception, as it posted a 1.9 per cent price increase. This was attributed to infrastructure upgrades and stringent land use laws.
Overall, in the quarter under review – October to December 2020 – land prices in Nairobi’s satellite towns increased mildly at 0.35 per cent.
For the whole year, they registered a 1.1 per cent drop, a huge contrast to the 6.93 per cent rise seen in 2019.
“Demand for land in suburbs is yet to peak, as developers are still holding on initiating plans until the current stocks of units are cleared,” said Hassanali.
According to the index, land value in Nairobi’s 18 suburbs remained stagnant in the quarter and fell 2.56 per cent overall compared to a rise in 2019.
The highest annual price drops in land value were experienced in Parklands and Riverside at 7.35 per cent and 7.2 per cent respectively. Both suburbs are dominated by apartments.
Hassanali said land prices in Nairobi, specifically the apartment market, whose underlying suburbs have seen the biggest losses, would always be a measure of the property market performance.
This is as land prices within the capital city (Nairobi suburbs) stagnated in the quarter under review, increasing by a marginal 0.002 per cent, a reversal of 11 consecutive months of price drops.
“Until we see a revival of the apartment market, which at the end of the day is a function of economic growth, land prices in the inner city will continue to remain stagnant,” Hassanali said.
Upper Hill had the highest land prices in all the suburbs, with an acre going for Sh509.9 million.
Other areas such as Karen, Gigiri, Westlands, Donholm, Kitsuru, Lang’ata, Kilimani, Runda, Lavington and Muthaiga averaged between Sh62 million and Sh509 million an acre.
The Hass Property Index showed that residential sale prices remained stagnant between October and December.
“Stagnant price growth over the year was attributed to price falls on apartments that fell an average 4.6 per cent over the year, while both detached and semi-detached houses retained positive price growth,” said the index.
Kileleshwa and Kilimani led the pack with the biggest quarterly and annual sales price falls in the apartment segment.
The quarterly fall was 2.6 per cent and 2.8 per cent respectively, while annually they fell by 9.9 per cent and 8.6 per cent.
The index noted that as at December, Kilimani and Kileleshwa accounted for 28 per cent and 17 per cent of the sales property mix or a combined 45 per cent effectively - now accounting for nearly one out of two properties on sale in Nairobi.
“We have seen the Kilimani and Kileleshwa markets move from steep price growth, in all ways a price boom, until it reached levels that buyers could no longer reach, with the roadblocks in mortgage finance and reduced liquidity from a global pandemic,” Hassanali said.
“Against this backdrop, the loading of extra costs onto developers, as soaring land prices and sky high finance costs, has served in shifting developers to create smaller apartments with lower price tags to allow buyers to continue to access their products at a price that works for both buyer and seller.”
“This shift in supply has led to suburb wide apartment repricing,” she added.
Residential rental prices rose by 1.1 per cent in the quarter, despite a fall in apartment rents of 1.24 per cent in the same period.
According to the index, apartments in Kilimani showed the strongest fall in quarterly rents at four per cent followed by Kileleshwa, which posted a price fall of 2.6 per cent in the period under review.
“While smaller apartments dominate the new build market in Kilimani and Kileleshwa and provide middle income housing at lower ticket prices, the sheer volume of new stock created rental price vulnerability for larger and older stock during the economic slowdown caused by 2020’s global pandemic, resulting in rental price corrections,” said Hassanali.
Over 2020, rental prices recorded a 5.5 per cent rise led by increased rental prices for detached houses at 7.3 per cent particularly in upmarket areas in Karen and Muthaiga “showcasing the high end market resilience to economic slowdowns.”
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