NAIROBI, Kenya, Sep 4 – Thindigua, Ridgeways, Lang’ata and Juja are the most attractive areas for real estate development in 2017 according to the Nairobi Metropolitan Area Residential Report – by Cytonn Investments.
The report shows that Thindigua and Ridgeways deliver a total return of 19.3 percent and 18.4 percent respectively while Lang’ata and Juja returns are at 17.4 percent and 17.3 percent, respectively.
Nancy Murule, Research Analyst at Cytonn Investment attributes this to proximity to high-end suburbs for Thindigua and Ridgeways, and proximity to the CBD and other business nodes for Lang’ata.
Juja is attractive due to the low supply of residential units and lower land prices.
“The key drivers for the increments in house prices for the best performing zones prices have mainly been high demand in the areas, ease of access from the CBD and other business districts, and lower prices compared to houses in other similar nodes,” Murule told Capital FM Business.
According to the report, on average residential houses prices increased by 3.8 percent in 2017 compared to a 7.4 percent increase in 2016 while rental yields remained fairly stable averaging at 5.6 percent in 2017 compared to the 2016 average of 5.2 percent.
Murule says demand for housing for purchase has slowed down attributed to the wait and see attitude adopted by investors as a result of the August Election and reduced access to credit in the market, as a result of the implementation of the interest rates capping in August 2016.
“Real estate continues to deliver attractive returns for investors when the public markets are delivering average returns, while also being a hedge against inflationary pressures. Development of residential real estate continues to provide attractive returns while delivering housing to combat the housing deficit of 2 million units, which grows by 200,000 units per annum,” she noted.
She says with the presidential election rerun will prolong the slowdown with the market expected to pick up in 2018.
The report is based on research conducted in 35 submarkets in the Nairobi Metropolitan Area and is a follow-up from the 2016 Report.
The report themed “Pockets of Value in the Face of Declining Performance” focused on the performance and the investment opportunity in the residential sector in Nairobi Metropolitan Area in 2017.