Land prices across Nairobi and satellite towns remained depressed even as developers take opportunity of renewed confidence in the housing market to clear present housing stocks built up in the static property market over the last two years.
On average, the price of land in Nairobi rose 0.23% in the second quarter of the year, compared to an increase of 2.5% in a similar quarter of 2016. Land in satellite towns saw an increase of 0.5% over the quarter compared to an 8.1% increase recorded in a similar quarter of 2016, just before the introduction of the interest rate cap that saw liquidity swept from the market.
The slowdown of credit in the market coupled with dwindling purchasing power on tight liquidity witnessed in the city saw an increase in distressed assets on the market further hampering land price inflation.
“While renewed confidence in the housing market will spur property market growth as developers move to introduce new supply, the property and land markets will only reach full potential when much needed capital is reintroduced to the market,” said Hass Consult’s Head of Development Consulting and Research Ms. Sakina Hassanali.
Despite the depressed market due to tight liquidity there were pocket of strong performance that defied the economic conditions and led to price increases.
Ngong was the top performer among satellite towns at a 4.25% increase in the quarter. Investors are warming up to Ngong town which is set to host a passenger station for the Standard Gauge Railway.
Ongata Rongai, another satellite town that will have a passenger station, has similarly benefited from investor interest with prices increasing by 2.6% over the same period.
Land in Kileleshwa was the best performing suburb over the last quarter with prices increasing by 3.96%, a correction after a series of price drops over six consecutive months in 2017.
Despite the cooling of the market over the last quarter, land continues to offer the best returns over the long term.
Investments made over the last 10 years yielded as much as 10 times the return in land than in equities and offered more than triple the return of investment in bonds.