NAIROBI: Land in Nairobi has appreciated in value five-fold in seven years, outperforming all other investment classes according to a new survey done by two agencies.
Property firm Hass Consult and Stanlib Investment Managers found that an acre of land in Nairobi is selling for Sh173.7 million on average, up from Sh32.4 million in 2007.
Kenneth Kaniu, chief investment officer at Stanlib says the prices are driven by soaring demand for office blocks in areas close to the city centre. “The galloping land prices in the city are being driven predominantly by commercial and high density residential developments,” Mr Kaniu said in a presentation yesterday. Property was the next best investment over the period, with cattle coming in third.
Property values have doubled in the seven-year period, Stanlib said. The escalation of land prices has meant a majority of Nairobi residents are outpriced within the city and its environs, with values climbing to all-time highs. As a result, prospective land buyers have been pushed further from the city, to emerging settlements like Isinya that are more than 50km away from their workplaces.
LEAGUE OF ITS OWN
UpperHill, that was until the early 2000s a residential area, was found to be the most expensive with an acre selling for Sh470 million. Its close proximity to the CBD is attracting multi-billion-shilling investment in commercial blocks and luxury hotels. Other costly surburbs are Kilimani at Sh371 million an acre, Westlands (Sh361.7 million), Kileleshwa (Sh250 million), Lavington (Sh202 million), and Spring Valley Sh173 million an acre.
Of the city’s high-end residential areas, land is currently cheapest in Karen and Langata, at around Sh45 million an acre followed by Runda at around Sh67 million. Karen and Runda have stringent development restrictions and do not allow for high-density buildings and office blocks.
“Land prices in the last four years have raised at twice the rate of cattle, and four times the rate of property while oil and gold prices have fallen over the same period,” said Mr Kaniu. He added, “It is clear from this data that the return on investment in developing areas of the city is phenomenal, with the suburbs, overall, experiencing a more than five-fold increase in prices over the last seven years. Clearly, this puts the city’s land prices into a bracket of investment that is in a league of its own.”
The suburbs in the city are dominated by the high income earners, such as chief executive officers, corporates, past and current Government officers, prominent business personalities and senior citizens, employees of international organisations, diplomats among others. He explained the ever-increasing prices are as result of commercial and high density residential developments and expansion of the middle-class.
“The pressure on land prices is caused by the inherently limited supply of land close to key city centre clusters. But, it is not the case that such land can appreciate indefinitely. Traditionally, once acreage reaches very high pricing levels, cities begin to evolve around multiple nodes, as is happening now in Nairobi. This makes the city’s evolving shape key to the choice of location for land buying, central doesn’t always guarantee high return,” added Kaniu.
HassConsult Head of Research and Marketing Sakina Hassanali noted that the high prices have continued even as investors continue to move to the middle and lower income areas. “Even as the prices of land continue to rise in the city for the last seven years, we have also witnessed a number of movements by investors as they seek land and property in middle and lower income areas. For example, the dormitory areas of Nairobi such as Kiambu, Machakos, Ngong, Kikuyu, Kitengela, Ruiru, Juja, Thika and Naivasha,” said Ms Hassanali.
The investors have also been relocating to major urban centres like Kisumu, Mombasa, Nakuru, Meru, Nyeri, and Eldoret. The upward price trend has led to proliferation of informal settlement and slums, for example; Kibera, Mathare, Mukuru Kwa Njenga, Korogocho, Kawangware among others.