Thika provides the most affordable place to buy land, highest returns outside Nairobi – Survey.

A metropolitan area survey has identified areas around Thika is the most affordable place to buy land outside of Nairobi

According to a Nairobi Metropolitan Area Land Report released by Cytonn Real Estate company, the asking prices for an acre in Thika is at Sh9.2 million compared to Syokimau and Mlolongo at Sh12 million.

An equivalent parcel of land in Athi River and goes for at Sh12.9 million and Sh13.1 million respectively.

Despite its low prices, the report also indicates that Thika offers investors the highest expected returns of 9.7% against a market average of 3.7%.

Average price for an acre in low rise residential zones is at Sh. 87 million with Spring Valley having the highest price at Sh. 154 million per acre, followed by NyaLi at Sh. 109 million.

In Karen, an acre currently stands at Sh. 52 million with Ridgeways and Runda both at Sh68 million. Kitusuru is at Sh70 million.

Speaking during the release of the report, Research Analyst Juster Kendi noted that Thika’s price appreciation 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 rapidly increased land prices over the last five years, whereby the area recorded an annual growth of 20.8 percent, 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,” Kendi said.

Karen, Kilimani, Ridgeways, Juja, and Kasarani were among the best-performing submarkets in terms of capital appreciation, recording annual rates of more than 5 percent in 2017.

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.

“The key factors driving land prices have mainly been positive demographic such as a high population growth rates of 2.6 percent per annum, higher than global averages of 1.2 percent, 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,” Senior Manager, Regional Market, Johnson Denge, noted.