NAIROBI, KENYA, APRIL 30, 2017 Cytonn Real Estate, the development affiliate of Cytonn Investments, today released its 2018 Cytonn Nairobi Metropolitan Area Land Report. The report themed “Nairobi Metropolitan Area Land Report 2018: The Resilient Investment Option” focused on land price appreciation in the Nairobi Metropolitan Area in 2017. It is based on research conducted in 17 suburbs and 11 Satellite Towns in the Nairobi Metropolitan Area.
According to the report, the land prices appreciated in most areas in Nairobi Metropolitan Area, growing with an annual appreciation of 3.7% in 2017, down from growth with a 6-year CAGR of 17.4%, attributable to the tough operating environment in 2017.
Speaking during the release, Senior Manager, Regional Market, Johnson Denge, noted that “the key factors driving land prices have mainly been positive demographic such as high population growth rates of 2.6% p.a, higher than global averages of 1.2%, a rising middle class with increasing purchasing power, continued investments in infrastructure such as roads, water, sewer and power connection, reduced supply of development class land at affordable prices, and a robust real estate sector.”
Based on individual zones performance, High rise residential areas recorded the highest capital appreciation rates, growing by 4.8% y/y against a market average of 3.7%. The growth was supported by high returns per unit of land value as the areas allow for densification and increased demand for housing from the growing middle-income population. Areas zoned for commercial development such as Westlands and Kilimani recorded annual appreciation rates of 3.4% y/y, down from a 6-year Compounded Annual Growth Rate “CAGR” of 20.0%. The slowdown in growth is attributed to the increased supply of commercial developments, with offices having an oversupply of 4.7 mn SQFT in 2017, and therefore a decline in demand for land for commercial developments. Site and service schemes had the lowest appreciation rates with the asking prices growing by 2.7% y/y, lower than the 3.0% recorded for unserviced land in the same localities. Implying that buyers are not willing to pay a premium for the services provided, rather opting for unserviced land which is cheaper, and providing the services on their own, in areas such as Ngong, unserviced land is 36.0% cheaper than serviced land.
The report noted that the land sector is facing challenges such as inadequate infrastructural development as seen through the shortage of trunk infrastructure such as electricity, water drainage, sewer and roads in specific areas, slowed real estate sector performance as a result of the extended electioneering period and thus reduced demand for land, and a difficult legal environment characterized by long procedures in title deed issuance and cases of double titling. The factors expected to shape the sector in 2018 are government land banking initiative, digitization of land ministry, and the relaxation of zoning regulations of some suburbs such as Spring Valley.
“Karen, Kilimani, Ridgeways, Juja and Kasarani were among the best performing sub markets in terms of capital appreciation, recording annual rates of more than 5.0% in 2017, and are thus the most attractive areas for both land and real estate development, while for site and service, Thika offers investors the highest expected returns of on average 9.7% against a market average of 3.7% ” Speaking during the release of the report, Research Analyst Juster Kendi noted that “ Thika’s price appreciations was boosted by speculative tendencies brought about by the growth potential of the area and urbanization pressure due to devolution ”.
The submarkets with the lowest returns were Nyari, Riverside and Upper Hill attributable to increased land prices over the last 5 years, whereby the area recorded an annual growth of 20.8%, an oversupply of office space in the node as well as traffic congestion into and out of the area that has led to many developers focusing on Kilimani, an upcoming office node with lower supply
The report indicates a positive outlook for the land sector in Nairobi and the firm expects the land and real estate market witness price increments driven by the stable macroeconomic outlook and positive legal reforms.
The report is available online: (link here)
Table 1: Land Market Conclusion and Outlook
|
Indicator |
2017 Projections |
2018 Projections |
2017 Outlook |
2018 Outlook |
|
Infrastructure Development |
It was expected that the government expenditure on infrastructure would increase by 35.6% in 2017 to Kshs. 342.2bn from Kshs. 252.6bn in 2016. This was exceeded by 1.5% to Kshs. 347.4bn in 2017 |
The government expenditure on infrastructure expected to increase by 14.2% in 2018 to Kshs. 396.8bn from Kshs. 347.4bn in 2017, therefore opening up areas along these corridors, translating to an increase in land value |
Positive |
Positive |
|
Legal Reforms |
Relaxation of the zoning regulations in some submarkets. Zoning regulations relaxed in Kyuna, Loresho and Spring Valley translating to higher returns, with Spring Valley recording an annual appreciation of 4.7% 1.0% points the market average Scrapping of land search fees which was done |
The digitization of the land ministry expected to enhance transparency and efficiency of land transactions hence reduced transaction cost |
Positive |
Positive |
|
Credit Supply |
We expected if the Banking Amendment Act 2015 is not reversed, to continue constraining credit supply to the sector thus reducing both development and off take of real estate. This was witnessed where we saw private sector credit growth decline to 2.4% as at October 2017 from a 5-year average of 14.4% with the number of active mortgage accounts dropping by 1.5% to 24,085 from 24,458 in 2015 |
In the case the Banking Amendment Act 2015 review is not successful, we expect low credit supply to continue hindering access to funds reducing both development and off take of real estate. However, we expect developers to embrace alternative funding such as Real Estate Investment Trusts (REITs), |
Negative |
Neutral |
|
Real Estate Activities |
Decreased activities due to elections uncertainty. This was evidenced with the value of building plans approved by the NCC, decreasing by 28.1% to Kshs 240.8 mn in 2017 from Kshs 308.4 mn in 2016 |
Increased real estate activities on the back of the calm conclusion of the prolonged electioneering period in 2017 and the government affordable housing initiative |
Negative |
Positive |
|
Performance |
We expected Land in Nairobi Metropolitan Area to grow with a 5-year CAGR of 19.4% between 2011 and 2016. Land prices, however recorded an annual capital appreciation of 3.7% in 2017 due to the prolonged electioneering period |
We expect land prices in Nairobi to record an annual capital appreciation of 10.2% in 2018 following the return to normalcy after the conclusion of the electioneering period |
Positive |
Positive |
Table 2: Nairobi Metropolitan Land Performance Over Time
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
|
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
Annual Capital Appreciation |
|
Nairobi Suburbs - High Rise Residential Areas |
49mn |
85mn |
102mn |
108mn |
14.7% |
4.8% |
|
Nairobi Suburbs - Low Rise Residential Areas |
39mn |
72mn |
84mn |
87mn |
14.4% |
4.5% |
|
Nairobi Suburbs - Commercial Areas |
156mn |
377mn |
458mn |
473mn |
20.5% |
3.4% |
|
Satellite Towns - Unserviced Land |
9mn |
16mn |
20mn |
20mn |
17.4% |
3.0% |
|
Satellite Towns - Site and service Schemes |
6mn |
13mn |
14mn |
14mn |
18.2% |
2.7% |
|
Average |
|
|
|
|
17.0% |
3.7% |
*Asking price per acre
Table 3: Capital Appreciation: High Rise Residential Areas
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance-High Rise Residential Zones in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
Capital Appreciation 2017 |
|
Kahawa |
33mn |
51mn |
60mn |
65mn |
12.0% |
|
|
Kileleshwa |
149mn |
227mn |
286mn |
306mn |
12.7% |
6.8% |
|
Kasarani |
32mn |
51mn |
60mn |
64mn |
12.0% |
6.1% |
|
Dagoretti |
28mn |
81mn |
95mn |
99mn |
23.6% |
4.0% |
|
Githurai |
21mn |
37mn |
45mn |
46mn |
14.2% |
2.2% |
|
Embakasi |
33mn |
61mn |
69mn |
70mn |
13.6% |
1.7% |
|
Average |
108m |
14.7% |
4.8% |
|||
Table 4: Capital Appreciation: Low Rise Residential Areas
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance- Low Rise Residential Zones in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
|
|
Karen |
25mn |
40mn |
46mn |
52mn |
12.9% |
12.2% |
|
Ridgeways |
24mn |
51mn |
62mn |
68mn |
19.0% |
9.2% |
|
Spring Valley |
64mn |
131mn |
147mn |
154mn |
15.7% |
4.7% |
|
Runda |
33mn |
58mn |
67mn |
68mn |
12.6% |
1.2% |
|
Kitisuru |
32mn |
59mn |
70mn |
70mn |
13.9% |
0.2% |
|
Nyari |
54mn |
93mn |
109mn |
109mn |
12.2% |
(0.1) % |
|
Average |
87mn |
14.4% |
4.5% |
|||
*Asking price per acre
Table 5: Capital Appreciation: Commercial Areas
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance- Commercial Zones in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
|
|
Kilimani |
114mn |
294mn |
360mn |
387mn |
22.5% |
7.5% |
|
CBD |
200mn |
450mn |
600mn |
634mn |
21.2% |
5. 7% |
|
Westlands |
150mn |
350mn |
453mn |
474mn |
21.1% |
4.6% |
|
Upper Hill |
200mn |
450mn |
512mn |
510mn |
16.9% |
(0.5) % |
|
Riverside |
116mn |
343mn |
362mn |
361mn |
20.8% |
(0.5) % |
|
Average |
473mn |
20.5% |
3.4% |
|||
*Asking price per acre
Table 6: Capital Appreciation: Satellite Towns Unserviced Land
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance- Unserviced Satellite Towns in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
|
|
Juja |
3mn |
7mn |
8.8mn |
9.6mn |
20.0% |
8.7% |
|
Athi River |
2mn |
3mn |
3.8mn |
4.1mn |
12.5% |
5.6% |
|
Ruaka |
40mn |
58mn |
74mn |
77mn |
11.6% |
4.3% |
|
Ruiru |
7mn |
15mn |
19.3mn |
19.7mn |
20.0% |
2.2% |
|
Ngong |
7mn |
12mn |
14.1mn |
14.4mn |
13.5% |
2.1% |
|
Limuru |
5mn |
13mn |
16.6mn |
16.7mn |
20.6% |
1.0% |
|
Ongata Rongai |
2mn |
10mn |
9.8mn |
9.9mn |
29.2% |
0.1% |
|
Utawala |
6mn |
9mn |
10.9mn |
11.0mn |
11.3% |
0.0% |
|
Average |
20.3mn |
17.4% |
3.0% |
|||
*Asking price per acre
Table 7: Capital Appreciation: Site and Service
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance- Site and Service Satellite Towns in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
Capital Appreciation 2017 |
|
Thika |
5mn |
7mn |
8.4mn |
9.2mn |
10.4% |
|
|
Ruai |
8mn |
12mn |
12.8mn |
13.1mn |
8.8% |
2.2% |
|
Syokimau-Mlolongo |
3mn |
12mn |
11.9mn |
12.1mn |
24.8% |
1.7% |
|
Ongata Rongai |
7mn |
16mn |
18.8mn |
19.1mn |
18.2% |
1.5% |
|
Ngong |
11mn |
18mn |
19.1mn |
19.4mn |
10.7% |
1.4% |
|
Athi River |
2mn |
11mn |
13.0mn |
12.9mn |
36.5% |
(0.3) % |
|
Average |
14mn |
18.2% |
2.7% |
|||
*Asking price per acre
NAIROBI, KENYA, APRIL 30, 2017 Cytonn Real Estate, the development affiliate of Cytonn Investments, today released its 2018 Cytonn Nairobi Metropolitan Area Land Report. The report themed “Nairobi Metropolitan Area Land Report 2018: The Resilient Investment Option” focused on land price appreciation in the Nairobi Metropolitan Area in 2017. It is based on research conducted in 17 suburbs and 11 Satellite Towns in the Nairobi Metropolitan Area.
According to the report, the land prices appreciated in most areas in Nairobi Metropolitan Area, growing with an annual appreciation of 3.7% in 2017, down from growth with a 6-year CAGR of 17.4%, attributable to the tough operating environment in 2017.
Speaking during the release, Senior Manager, Regional Market, Johnson Denge, noted that “the key factors driving land prices have mainly been positive demographic such as a high population growth rates of 2.6% p.a, higher than global averages of 1.2%, a rising middle class with increasing purchasing power, continued investments in infrastructure such as roads, water, sewer and power connection, reduced supply of development class land at affordable prices, and a robust real estate sector.”
Based on individual zones performance, High rise residential areas recorded the highest capital appreciation rates, growing by 4.8% y/y against a market average of 3.7%. The growth was supported by high returns per unit of land value as the areas allow for densification, and increased demand for housing from the growing middle-income population. Areas zoned for commercial development such as Westlands and Kilimani recorded annual appreciation rates of 3.4% y/y, down from a 6-year Compounded Annual Growth Rate “CAGR” of 20.0%. The slowdown in growth is attributed to the increased supply of commercial developments, with offices having an oversupply of 4.7 mn SQFT in 2017, and therefore a decline in demand for land for commercial developments. Site and service schemes had the lowest appreciation rates with the asking prices growing by 2.7% y/y, lower than the 3.0% recorded for unserviced land in the same localities. Implying that buyers are not willing to pay a premium for the services provided, rather opting for unserviced land which is cheaper, and providing the services on their own, in areas such as Ngong, unserviced land is 36.0% cheaper than serviced land.
The report noted that the land sector is facing challenges such as inadequate infrastructural development as seen through the shortage of trunk infrastructure such as electricity, water drainage, sewer and roads in specific areas, slowed real estate sector performance as a result of the extended electioneering period and thus reduced demand for land, and a difficult legal environment characterized by long procedures in title deed issuance and cases of double titling. The factors expected to shape the sector in 2018 are government land banking initiative, digitization of land ministry, and the relaxation of zoning regulations of some suburbs such as Spring Valley.
“Karen, Kilimani, Ridgeways, Juja and Kasarani were among the best performing sub markets in terms of capital appreciation, recording annual rates of more than 5.0% in 2017, and are thus the most attractive areas for both land and real estate development, while for site and service, Thika offers investors the highest expected returns of on average 9.7% against a market average of 3.7% ” Speaking during the release of the report, Research Analyst Juster Kendi noted that “ Thika’s price appreciations was boosted by speculative tendencies brought about by the growth potential of the area and urbanization pressure due to devolution ”.
The submarkets with the lowest returns were Nyari, Riverside and Upper Hill attributable to increased land prices over the last 5 years, whereby the area recorded an annual growth of 20.8%, an oversupply of office space in the node as well as traffic congestion into and out of the area that has led to many developers focusing on Kilimani, an upcoming office node with lower supply
The report indicates a positive outlook for the land sector in Nairobi and the firm expects the land and real estate market witness price increments driven by the stable macroeconomic outlook and positive legal reforms.
The report is available online: (link here)
Table 1: Land Market Conclusion and Outlook
|
Indicator |
2017 Projections |
2018 Projections |
2017 Outlook |
2018 Outlook |
|
Infrastructure Development |
It was expected that the government expenditure on infrastructure would increase by 35.6% in 2017 to Kshs. 342.2bn from Kshs. 252.6bn in 2016. This was exceeded by 1.5% to Kshs. 347.4bn in 2017 |
The government expenditure on infrastructure expected to increase by 14.2% in 2018 to Kshs. 396.8bn from Kshs. 347.4bn in 2017, therefore opening up areas along these corridors, translating to an increase in land value |
Positive |
Positive |
|
Legal Reforms |
Relaxation of the zoning regulations in some submarkets. Zoning regulations relaxed in Kyuna, Loresho and Spring Valley translating to higher returns, with Spring Valley recording an annual appreciation of 4.7% 1.0% points the market average Scrapping of land search fees which was done |
The digitization of the land ministry expected to enhance transparency and efficiency of land transactions hence reduced transaction cost |
Positive |
Positive |
|
Credit Supply |
We expected if the Banking Amendment Act 2015 is not reversed, to continue constraining credit supply to the sector thus reducing both development and off take of real estate. This was witnessed where we saw private sector credit growth decline to 2.4% as at October 2017 from a 5-year average of 14.4% with the number of active mortgage accounts dropping by 1.5% to 24,085 from 24,458 in 2015 |
In the case the Banking Amendment Act 2015 review is not successful, we expect low credit supply to continue hindering access to funds reducing both development and off take of real estate. However, we expect developers to embrace alternative funding such as Real Estate Investment Trusts (REITs), |
Negative |
Neutral |
|
Real Estate Activities |
Decreased activities due to elections uncertainty. This was evidenced with the value of building plans approved by the NCC, decreasing by 28.1% to Kshs 240.8 mn in 2017 from Kshs 308.4 mn in 2016 |
Increased real estate activities on the back of the calm conclusion of the prolonged electioneering period in 2017 and the government affordable housing initiative |
Negative |
Positive |
|
Performance |
We expected Land in Nairobi Metropolitan Area to grow with a 5-year CAGR of 19.4% between 2011 and 2016. Land prices, however recorded an annual capital appreciation of 3.7% in 2017 due to the prolonged electioneering period |
We expect land prices in Nairobi to record an annual capital appreciation of 10.2% in 2018 following the return to normalcy after the conclusion of the electioneering period |
Positive |
Positive |
Table 2: Nairobi Metropolitan Land Performance Over Time
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
|
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
Annual Capital Appreciation |
|
Nairobi Suburbs - High Rise Residential Areas |
49mn |
85mn |
102mn |
108mn |
14.7% |
4.8% |
|
Nairobi Suburbs - Low Rise Residential Areas |
39mn |
72mn |
84mn |
87mn |
14.4% |
4.5% |
|
Nairobi Suburbs - Commercial Areas |
156mn |
377mn |
458mn |
473mn |
20.5% |
3.4% |
|
Satellite Towns - Unserviced Land |
9mn |
16mn |
20mn |
20mn |
17.4% |
3.0% |
|
Satellite Towns - Site and service Schemes |
6mn |
13mn |
14mn |
14mn |
18.2% |
2.7% |
|
Average |
|
|
|
|
17.0% |
3.7% |
*Asking price per acre
Table 3: Capital Appreciation: High Rise Residential Areas
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance-High Rise Residential Zones in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
Capital Appreciation 2017 |
|
Kahawa |
33mn |
51mn |
60mn |
65mn |
12.0% |
|
|
Kileleshwa |
149mn |
227mn |
286mn |
306mn |
12.7% |
6.8% |
|
Kasarani |
32mn |
51mn |
60mn |
64mn |
12.0% |
6.1% |
|
Dagoretti |
28mn |
81mn |
95mn |
99mn |
23.6% |
4.0% |
|
Githurai |
21mn |
37mn |
45mn |
46mn |
14.2% |
2.2% |
|
Embakasi |
33mn |
61mn |
69mn |
70mn |
13.6% |
1.7% |
|
Average |
108m |
14.7% |
4.8% |
|||
Table 4: Capital Appreciation: Low Rise Residential Areas
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance- Low Rise Residential Zones in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
|
|
Karen |
25mn |
40mn |
46mn |
52mn |
12.9% |
12.2% |
|
Ridgeways |
24mn |
51mn |
62mn |
68mn |
19.0% |
9.2% |
|
Spring Valley |
64mn |
131mn |
147mn |
154mn |
15.7% |
4.7% |
|
Runda |
33mn |
58mn |
67mn |
68mn |
12.6% |
1.2% |
|
Kitisuru |
32mn |
59mn |
70mn |
70mn |
13.9% |
0.2% |
|
Nyari |
54mn |
93mn |
109mn |
109mn |
12.2% |
(0.1) % |
|
Average |
87mn |
14.4% |
4.5% |
|||
*Asking price per acre
Table 5: Capital Appreciation: Commercial Areas
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance- Commercial Zones in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
|
|
Kilimani |
114mn |
294mn |
360mn |
387mn |
22.5% |
7.5% |
|
CBD |
200mn |
450mn |
600mn |
634mn |
21.2% |
5. 7% |
|
Westlands |
150mn |
350mn |
453mn |
474mn |
21.1% |
4.6% |
|
Upper Hill |
200mn |
450mn |
512mn |
510mn |
16.9% |
(0.5) % |
|
Riverside |
116mn |
343mn |
362mn |
361mn |
20.8% |
(0.5) % |
|
Average |
473mn |
20.5% |
3.4% |
|||
*Asking price per acre
Table 6: Capital Appreciation: Satellite Towns Unserviced Land
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance- Unserviced Satellite Towns in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
|
|
Juja |
3mn |
7mn |
8.8mn |
9.6mn |
20.0% |
8.7% |
|
Athi River |
2mn |
3mn |
3.8mn |
4.1mn |
12.5% |
5.6% |
|
Ruaka |
40mn |
58mn |
74mn |
77mn |
11.6% |
4.3% |
|
Ruiru |
7mn |
15mn |
19.3mn |
19.7mn |
20.0% |
2.2% |
|
Ngong |
7mn |
12mn |
14.1mn |
14.4mn |
13.5% |
2.1% |
|
Limuru |
5mn |
13mn |
16.6mn |
16.7mn |
20.6% |
1.0% |
|
Ongata Rongai |
2mn |
10mn |
9.8mn |
9.9mn |
29.2% |
0.1% |
|
Utawala |
6mn |
9mn |
10.9mn |
11.0mn |
11.3% |
0.0% |
|
Average |
20.3mn |
17.4% |
3.0% |
|||
*Asking price per acre
Table 7: Capital Appreciation: Site and Service
|
All Values in Kshs Unless Stated Otherwise |
||||||
|
Land Price Performance- Site and Service Satellite Towns in Nairobi Metropolitan Area |
||||||
|
Location |
*Price in 2011 |
*Price in 2015 |
*Price in 2016 |
*Price in 2017 |
6-year CAGR |
Capital Appreciation 2017 |
|
Thika |
5mn |
7mn |
8.4mn |
9.2mn |
10.4% |
|
|
Ruai |
8mn |
12mn |
12.8mn |
13.1mn |
8.8% |
2.2% |
|
Syokimau-Mlolongo |
3mn |
12mn |
11.9mn |
12.1mn |
24.8% |
1.7% |
|
Ongata Rongai |
7mn |
16mn |
18.8mn |
19.1mn |
18.2% |
1.5% |
|
Ngong |
11mn |
18mn |
19.1mn |
19.4mn |
10.7% |
1.4% |
|
Athi River |
2mn |
11mn |
13.0mn |
12.9mn |
36.5% |
(0.3) % |
|
Average |
14mn |
18.2% |
2.7% |
|||
*Asking price per acre
