Land price growth slowed in and around Nairobi in 2018, according to the Hass Land Price Index issued on Thursday. However, the overall deceleration has come on a shift in land pricing towards localised pricing driven by immediate development needs, rather than general rises driven by speculation and sentiment.
“We are really seeing each area emerge with its own independent market dynamic, driven by its own infrastructure changes, pace of current building and development potential,” said Sakina Hassanali, Head of Development, Consulting and Research at Hass Consult.
This shift towards pricing driven by practical development needs is creating a far wider spread in price trends, with each area effectively running on its own market dynamics.
“As a result, the spread from the best performing suburbs to the worst performing has become far wider. The top performing areas, such as Juja in 2018, which reported land price growth of 16.5 per cent, continue to report exceptional price growth. But areas where there is now little remaining land for development, or where there has been some over-building and there is clear vacancy, experienced little land price growth momentum in 2018,” she said.
Overall, land prices across Nairobi’s suburbs rose by 1.1% in 2018. But in Gigiri, which has moved into a relatively intense period of residential and commercial development, land prices rose by 10.6 per cent across the year, and were still accelerating at year end.
In the 12 weeks from October to December, land prices in Gigiri rose by a further 3.4%. Land prices also rose sharply in Ridgeways in 2018, up 8.7% over the year, but this growth slowed significantly in Q4, to just 0.7%.
Growth was also strong across the year in Kileleshwa, Kitisuru and Langata.
Nairobi’s satellite areas saw much stronger land price growth than the city suburbs, rising by an overall 3.7%, compared with 5.4 % in 2017.
Key drivers were the land price rises in Juja, and rises of 9.3 and 9.2% in Ongata Rongai and Ngong. Local centres of development such as Athi River, Tigoni and Limuru also continued to rise at rates of 6 per cent or above.
The sharp climber for the year, however, and the area to watch for further land price growth in 2019, was Mlolongo, where land prices rose by 7.6% in 2018, but almost entirely in the second half of the year. From October to December alone, Mlolongo prices rose by 4.6%.
“As the attention of developers moves from one high potential area to the next, local price hotspots are continuing to underpin overall land price growth, maintaining the relative strength of the region’s land as an asset class, as the global slowdown impacted returns in many other areas,” said Sakina.
Gold prices fell by 5.5% in 2018, while oil prices fell by 16.3%, and live cattle prices stagnated.
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“Overall, the market for land is becoming more sophisticated. Where change is underway, the returns remain outstanding for any asset class, but in areas that are now more fully developed, often to a high density, prices are now much more static,” said Sakina.
