NAIROBI, Kenya, Oct 19 – High land prices in Nairobi are now seeing some housing developments sprout outside of the nation’s capital, as developers seek to meet the housing demand at a more affordable price.
With an acre of land in Kilimani, for example, going for Sh300 million, developers find building in Nairobi unreasonable and virtually impossible to make a substantial return.
“Over the last four years land prices in parts of Nairobi have shot up by a thousand percent, which is why we are seeing the rise of “super developments” where a developer buys a big chunk of land outside the city and puts a huge number of houses on it,” said Nathan Luesby, Jenga Web Managing Director.
Luesby says as long as land carries the value it does in Kenya, this trend could continue, especially as new areas gain interest from buyers eager to get onto the property ladder.
“Along Thika Road, five years ago, a developer valued his land at Sh5 million an acre. It’s at Sh50 million an acre now. The problem is if somewhere gets ‘hot’, land prices skyrocket,” he explained.
Real Estate firm Tysons Limited Marketing Manager Isaac Maira points out that the larger developments in outlying areas are beginning to make a lot of sense, now that there have been major infrastructural improvements to road networks.
“Accessibility is better now. Look at Thika Road, Mombasa Road and even the road leading to Namanga, you can see some of these developments sprouting up, which are catering to first-time buyers,” he said.
Managing Director of Superior Homes Kenya Ian Henderson, who is constructing Greenpark Estate – over 600 units off Mombasa Road near Athi River – says though he acquired the land before prices began to spike, the trend is likely to continue.
“If we were developing Greenpark in the centre of Nairobi the houses would cost Sh40 million to Sh50 million. I think we’ll continue to see more commuter estates on the periphery of Nairobi,” he said.
Greenpark is a mix of three bedroom quarter villas, three bedroom maisonettes, four bedroom Bungalows and Super Bungalows ranging from Sh7.7 million to Sh17 million.
Other developers are also venturing in to cheaper residential projects geared towards housing low-income earners.
Suraya Property Group, for instance, recently unveiled plans for of its new housing project dubbed Sucasa, which will be residential flats located off Mombasa Road.
The price range will be between Sh900,000 for a bed-sitter and Sh2.85 million for a two bedroom apartment, a stark difference from the average value for a one to three bedroom property currently at Sh11.5 million, according to the latest HassConsult Property Index.
Despite the generally high property prices in Nairobi, the report revealed that Kenya still remains a solid area to invest in property, guaranteeing better returns than even developed economies like the US.
For instance buying a Sh10 million home in Kenya with a 20 percent deposit and a nine percent interest rate over a 10 year period yielded a return of Sh18.9 million while, buying a home worth the equivalent of Sh10 million in the US with a 20 percent deposit and a three percent interest rate over a 10 year period yielded a return of Sh3.7 million.
The reason for this, according to the report, is the 331 percent appreciation of property in Kenya over the last 10 years versus a 50 percent rate for US properties.
“The best advice to first time buyers who are still waiting for rates to come down, is don’t wait to get on the property ladder because the capital gains make up for it,” Luesby said.