Kenyan land market surges despite double brakes on election and tight finance

County land prices rose by an average 7.37 per cent in 2017, compared to a 12.07 per cent rise in 2016.
The county land survey also identified several spots where land prices appear to have overheated, only to sink thereafter, among them Thika.

The 2018 East Africa Property Investment (EAPI) Summit today unveiled the new Hass County Land Prices Report as it launched two days of intensive sessions on the regional real estate industry most pressing challenges, and greatest opportunities.

The summit reported that county land prices had risen by an average 7.37 per cent in 2017, compared to a 12.07 per cent rise in 2016, suffering a general slowdown on election uncertainty and Kenya’s new interest rate cap.

However, the county survey delivered evidence of ongoing market strength, as well as underlying patterns pushing land prices in sometimes opposite directions.

“Countrywide, infrastructure development continued to drive strong price growth.” Said HassConsult Head of Development Consulting Sakina Hassanali. “For many investors, the magical key still remains ‘follow the road’”

Local economic growth also continued to drive land prices upwards.

“We see clearly from price growth of 12 to 14 per cent in Nakuru and Kisumu last year that areas enjoying an influx of business and finance, and underpinned by robust agricultural economies, were only slowed marginally by the elections and rate cap.” said Kfir Rusin, EAPI Managing Director.

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The county land report, which covers 10 counties and 75 towns across Kenya, also analysed the towns and suburbs that experienced the greatest growth in land prices, and those that suffered falling land prices, finding evidence of pricing cycles playing out within multiple counties.

“From the more than 20 per cent surge in land prices in Utange, which delivered the strongest growth of the year on an influx of elite residents vacating Nyali, to a similar movement to Ngata by residents from Nakuru, the data showed shifts to new residential beacons, as intensive development began to take the shine off former hot spots.” said Ms Hassanali.

“Likewise, in tracking the surge in prices in Embakasi, and to a lesser extent Donholm, we see the first signs of gentrification of inner city areas as congestion and commuter lifestyles elevate the attraction of these areas ‘proximity to the workplace’.”

Commenting on these urban cycles now playing out in Kenya, Mr Rusin noted that East Africa was now running a full cycle from initial generation of new conurbations, to the regeneration of older centres.

“This latest survey and its wealth of data show a clear picture of early waves of development driven by advantages of accessibility, location, local activity, and resources such as strong water supply. But as development intensifies, many conurbations experience an evolving character that triggers waves of buyer flight and then a new type of influx.” he said.

“Investment into such cycles requires far more insight into the nature of specific areas than was previously the case, when all land prices were rising exponentially.”

The county land survey also identified several spots where land prices appear to have overheated, only to sink thereafter, among them Thika, where land prices rose by more than 30 per cent in 2016, only to fall by more than 4 per cent last year, in the biggest price fall of the year.

“Investors need to be wary of surges that fly over and above any development norm, as spots that will very often suffer subsequent price corrections, or, at the very least, subdued and even depressed pricing for some years to follow, as is the case of Ridgeways in Kiambu.” said Ms Hassanali.

However, as analysts moved to review the drivers in the multiple local real estate markets, the strength of the overall land price growth - in an election year that saw many commitments stalled and finance constrained on policy interventions - was “a clear testimony to the ongoing potential and needs in Kenyan real estate.” said Mr Rusin.