By Clifford Akumu
Kenya’s land prices surged last year in the backdrop of double brakes on the election and tight finance, new report now shows.
According to the report dubbed Hass County Land Prices Report launched yesterday during the ongoing 2018 East Africa Property Investment Summit, county land prices had risen by an average 7.37 percent in 2017, compared to a 12.07 percent rise in 2016.
Despite suffering a general slowdown in election uncertainty and Kenya’s new interest rate cap, the land market realized a surge, notes the report.
However, the county survey delivered evidence of ongoing market strength, as well as underlying patterns pushing land prices in sometimes opposite directions.
“Countrywide, infrastructure development continued to drive strong price growth,” said HassConsult Head of Development Consulting Sakina Hassanali. “For many investors, the magical key still remains ‘follow the roads’.”
Local economic growth also continued to drive land prices upwards.
“We see clearly from price growth of 12 to 14 percent in Nakuru and Kisumu last year that areas enjoying an influx of business and finance, and underpinned by robust agricultural economies, were only slowed marginally by the elections and rate cap,” said Kfir Rusin, EAPI Managing Director.
The county land report, which covers 10 counties and 75 towns across Kenya, also analyzed the towns and suburbs that experienced the greatest growth in land prices and those that suffered falling land prices, finding evidence of pricing cycles playing out within multiple counties.
“From the more than 20 percent surge in land prices in Utange, which delivered the strongest growth of the year on an influx of elite residents vacating Nyali, to a similar movement to Ngata by residents from Nakuru, the data showed shifts to new residential beacons, as intensive development began to take the shine off former hot spots,” said Ms Hassanali.
“Likewise, in tracking the surge in prices in Embakasi, and to a lesser extent Donholm, we see the first signs of the gentrification of inner city areas as congestion and commuter lifestyles elevate the attraction of these areas’ proximity to the workplace.”
Commenting on these urban cycles now playing out in Kenya, Mr. Rusin noted that East Africa was now running a full cycle from initial generation of new conurbations to the regeneration of older centers.
“This latest survey and its wealth of data show a clear picture of early waves of development driven by advantages of accessibility, location, local activity, and resources such as strong water supply. But as development intensifies, many conurbations experience an evolving character that triggers waves of buyer flight and then a new type of influx,” he said.
“Investment into such cycles requires far more insight into the nature of specific areas than was previously the case when all land prices were rising exponentially.”
The county land survey also identified several spots where land prices appear to have overheated, only to sink thereafter, among them Thika, where land prices rose by more than 30 percent in 2016, only to fall by more than 4 percent last year, in the biggest price fall of the year.
“Investors need to be wary of surges that fly over and above any development norm, as spots that will very often suffer subsequent price corrections, or, at the very least, subdued and even depressed pricing for some years to follow, as is the case of Ridgeways in Kiambu,” said Ms. Hassanali.
However, as analysts moved to review the drivers in the multiple local real estate markets, the strength of the overall land price growth – in an election year that saw many commitments stalled and finance constrained on policy interventions – was “a clear testimony to the ongoing potential and needs in Kenyan real estate,” said Mr Rusin.
The two-day summit will discuss regional real estate industry’s most pressing challenges, and greatest opportunities.
