Property Reality Company (PRC) this week released its second edition of its land index, which tracks changes in prices across several locations on the outskirts of Nairobi. According to PRC General Manager Abraham Mureithi, demand for property is on the rise, driven by growing incomes.
“This is majorly driven by an increasing middle class who have a very high disposable income and the rural urban migration across major town centers which places a lot of strain on the limited land available,” Mr Mureithi said.
The increase in land prices is also influenced by the fact that it is a relatively low-risk investment, he added. Currently, there’s an information gap on price changes for land, with the available data concentrating on affluent areas that are out of reach for the majority. This has resulted in the exploitation of consumers by most land sellers, who are pricing land above market rates.
On average, according to the PRC report, the value of land increased by 17% during the two periods under review, with Ruaka recording the highest price increase of 125% with 1/8th of an acre retailing at an average price of Ksh18,000,000/= up from Ksh8,000,000. This was followed by Kiserian and Utawala at 42% and 32% respectively.
Additional research conducted by PRC, which surveyed 660 respondents in Nairobi, shows that cost is a critical consideration factor in the purchase of land across low, middle and high income segments. Consequently, 81% of all land selling firms allow installment purchase with 82% of the companies giving up to six months payment terms. Also, firms have partnered with financial service providers to advance credit to potential buyers.
The recently enacted law on interest rates is bound to increase the uptake of property as real estate is a relatively safe investment and title deeds can be used as a security for loans. “We foresee a situation where more and more financial services providers give loan facilities using title deeds as security,” said Mr Mureithi. “This will be one of the strategies to survive the cut-throat competition.”
[crp]
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