While oil and gold prices have fallen, in nine of Nairobi’s fastest developing suburbs, land prices are up 535 per cent, outpacing ‘all other asset classes as a return on investment’.
During the launch of the country’s first land price index, it was established that the average price per acre is now 170 million Kenyan shillings from 30 million Kenyan shillings.
“Over the last couple of years we have been collecting a lot of data on land and to date, we have collected about 10,000 records of land,” Sakina Hassanali, head of research and marketing at HassConsult told CNBC Africa.
“What we did is sieve through the data to come down to an average for land prices for nine suburbs. These nine suburbs have the most development activity.”
According to findings of the index by HassConsult and Stanlib, there is an escalating demand for land, mainly driven by commercial and high-density residential developments.
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“We find the land index will be very good for the market because what we have seen in the recent past is sought of runaway prices, and we hope that this will provide a reference point for some of the prices within Nairobi’s suburbs,” Hassanali noted.
Nairobi’s Upper Hill area boasts some of the most expensive land with an acreage going for around 470 million Kenyan shillings, followed by the Kilimani area which is 100 million Kenyan shillings cheaper.
These areas are costly because they offer both commercial and residential use. The most inexpensive land is the leafy suburban area of Karen, which costs around 45 million Kenyan shillings.
Meanwhile, property prices in Nairobi rose by 2.4 per cent in the fourth quarter of 2014, mainly driven by a sharp increase in asking prices for apartments.
“This shows that the market is sort of bouncing back. In the beginning of 2014 it was a little bit subdued but it has recovered in the second two quarters of the year, the total increase in sale prices is about 8.3 per cent over the year,” Hassanali said
However, a survey by the country’s central bank revealed that there were less than 20,000 mortgage loans in the country in 2013 – a fraction of the population of capital city, Nairobi.
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“With the roadblocks in mortgage finance, still priced at extraordinary levels by international, or any, standards, the market only has so far it can reach on price,” Hassanali said at the launch of the price index.
“Against this backdrop, the loading of extra costs onto developers, as soaring land prices, new city fees, and sky high finance costs, has only served to show how resilient our nation’s developers are.”