Land prices in high-end Nairobi estates grew at a faster pace in the second quarter of this year, overtaking those in the city’s satellite towns for the first time in five years.
The relative growth in land prices also reflects the economic challenges facing the middle class, who provide demand for land in the towns.
A new survey by real estate firm HassConsult shows that average prices in suburbs such as Muthaiga, Spring Valley, Parklands and Upperhill rose by 1.55 percent in the second quarter of the year.
In satellite towns such as Kiserian, Kitengela, Ngong, Ongata Rongai, Juja and Thika, prices grew at 1.25 percent in the period, the slowest pace of expansion in two years, down from 2.4 percent in the first quarter of the year.
“The Nairobi suburbs have shown consistency in price movement. Demand for standalone house units also bodes well for land prices in low-density estates, complementing the city's bright apartment development hotspots,” said HassConsult co-CEO and creative director Sakina Hassanali.
“As economic conditions become tougher for the middle and upper middle class, the previously high demand for land in Nairobi's outlying areas, where prices were within reach of private home developers, is waning, leading to lower growth in areas such as Kiserian, Kitengela, Ngong, Ongata Rongai, Juja, and Thika.”
She added that developers are also keeping an eye on the potential oversupply of apartments in these satellite areas, which is now manifesting in stagnant rental prices and falling sales prices for units in a majority of the towns.
On average, an acre of land in the suburbs stands at Sh221.2 million, well ahead of the satellite towns' average of Sh32.1 million per acre.
Upperhill, Westlands and Parklands are home to the city’s priciest land at Sh545.8 million, Sh498.3 million and Sh463.6 million per acre, respectively, while Langata and Karen are the lowest priced at Sh86.2 million and Sh72.3 million per acre, respectively.
These high prices for the city suburbs mean that the land is out of reach for the majority of would-be buyers except deep-pocketed commercial developers and high-net-worth individuals.
The satellite towns are more within reach of middle-class buyers, with a significant number buying the land to build their own homes. The lowest priced satellite town is Kiserian with a price of Sh13 million per acre, which works out to an average of Sh3.25 million for a quarter-acre plot, or Sh1.63 million for an eight-acre plot.
The satellite towns were coming off six straight quarters of strong price growth before the second-quarter dip. Annual price increases touched seven-year highs of 12.5 percent on average last year, with HassConsult attributing the quarter two growth hiccup to a cooling off of the market.
