This year’s third quarter results show that land in low- and middle-market areas in Nairobi’s satellite towns of Juja, Athi River, Kiserian, Kitengela, Mlolongo, Syokimau and Tigoni yielded returns of more than 6.27 times.
And according to Hass Consult, a Nairobi-based property management consultant, “The attractive returns on land in these satellite towns has become a key driver of demand, which has now become the new revenue stream for thousands of investments groups, co-operatives societies, saccos, learning institutions and individual investors.”
12 Times More Yield Than Gold
And land leads all other investments as the one with highest returns. Compared to returns on gold and cattle, land proved the better investment, yielding more than 12 times the return on gold and 10 times that on cattle over a seven-year period. Crude oil also reregistered negative returns during the same period.
Stocks and Bonds
Investment in land also gained over annualized stocks and bond returns.”Whilst the 91-day Treasury bill historically narrowed the gap in the annual return on investments between the property market and bonds, investment in land has shown no down cycle and remains the most stable investment option with the highest yields over the seven years,” Sakina Hassanali, the Hass Consult head of research and marketing.
This is despite a weakening economy who negative effects have hit hard the low and middle income groups.” The low- and middle-income markets have been hard hit by the surging interest rates, which have driven house prices up. Properties in low- and middle-income areas saw the largest shift, with a 3 per cent increase in the quarter, the highest in almost two years, compared with a 0.1 per cent shift in high-income areas.” says Ms Hassanali
Buyers in Athi River have been hit the hardest as house prices went up by 6.3 per cent. Kiambu and Limuru followed with increases of 4 per cent and 3 per cent respectively.
Home owners in Mlolongo and Kiserian have also been affected, with the prices of properties for sale going up by 2.4 and 2.1 per cent respectively.
Surprisingly, high income group areas such as Spring Valley, Muthaiga and Ridgeways have had the lowest return on investment, with Spring Valley going as low as 3.78 times.
Bank Lending Rates
The Central Bank of Kenya has raised its lending rate (CBR) from 8.5 per cent to 11.5 per cent due to a weakening shilling, thus raising the Kenya Banks’ Reference Rate (KBRR) from 8.54 per cent to 9.87 per cent.
“The new lending rates took effect in the quarter, thus affecting the developers who still have to repay their loans. This, coupled with higher mortgage rates, has led to an increase in asking prices for property in the satellite towns,” says Ms Hassanali.