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Land prices in Kenya swell as political stability revs up demand

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[dropcap]F[/dropcap]oreign investors and Kenyans seeking to buy land in the country have to dig deeper in their pockets as prices surge following improved political climate.

Political stability after last year’s disputed elections has pushed up demand for land as both small and big investors scramble to get a pie.

Land buying companies top the list of those who have pushed up demand for the resource as they buy huge parcels, subdivide into eighth-acre portions and sell to individuals.

Demand has shot up both in areas around the capital and upcountry, according to industry players.

In areas surrounding Nairobi, which include Rongai, Kitengela, Syokimau, Athi River, Juja, Ruiru and Ruai, the cost of an eighth of acre has hit Ksh 4 million in residential areas neighboring towns and Ksh 2.5 million in those further away.

Latest appreciation in prices has been in the last three months following political truce between President Uhuru Kenyatta and opposition leader Raila Odinga in March.

The pact that followed two divisive polls in 2017 led to political stability that unlocked activities in the real estate sector.

“The truce gave people the confidence to buy land and build houses because of the resultant positive political climate,” Antony Kuyo, a consultant at Avent Properties, said Wednesday.

Kuyo said property developers moved to complete projects that had stalled due to election activities and others have sought land to build, the main reason prices have been on the rise. He said that prices can only go up, and not down in the coming months due to several factors.

“I don’t see any reason to make prices fall. The economy is expected to grow this year by about 6 percent, Saccos are willing to lend money to people investing in land and the government is moving to invest in houses. Coupled with good political environment, prices cannot fall,” he said.

In several upcountry towns, eighth-acre pieces of land are currently going for at least Ksh 2 million, with prices sustaining upward trend as business booms thanks to county governments. Within the town centres, the cost of such plots has hit up to Ksh 15 million as real estate booms.

Similarly, within central business districts of towns in the suburbs that border Nairobi, an eighth goes for up to Ksh 35 million, thanks to construction of malls and other business centers.

“I have been looking for quarter acre to buy in my rural home but the price is prohibitive. Before elections, I was asked to part with Ksh 2 million. Right now sellers are asking for Ksh 2.5 million,” recounted Moses Kinyanjui, who comes from Nyeri.

A recent survey by Cytonn, a Nairobi-based investment firm, noted upcountry towns are experiencing faster rise in land prices due to increased demand for commercial and residential properties.

In Nyeri, central Kenya for instance, the survey showed an eighth-acre piece of land is being sold at an average of Ksh 2 million, from less than Ksh 1 million two years ago. And in other parts of the country, the same piece of land is being sold for at least Ksh 1.5 million.

Cytonn attributed the rising price of land across the country to high rental yields for both commercial and residential properties.

Rental yields in Nyeri, Mombasa, Kisumu, and Nakuru stand at between 9.6% and 13% for commercial properties and 4.1% to 6% for residential. The huge returns are pushing up investment in residential houses.

Another key factor set to push up land prices in the coming months is the actualisation of the housing projects across the country in President Uhuru Kenyatta’s Big Four Agenda, according to analysts.

The massive projects in which the government seeks to build 500,000 units by 2022 will push up demand for land and thus prices, with the government currently working on key designs for the project.

(US$1 = Ksh 101.01)

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