Real Estate Kenya: Towns With High Growth Potential

Kenyan Towns With High Real Estate Growth Potential

Real Estate Kenya: Towns With High Growth Potential


December 28, 2018 | By : Hayer One Marketing

The Kenyan population will more than triple over the next 40 years, this is the finding of UN-HABITAT in its 2010 report on the State of African Cities: Governance, Inequality and the Land Market. According to several studies and statistics on the question, the African continent will experience a process of very sustained population during the next decades.

A demographic growth that will inevitably be accompanied by strong urbanization of cities that has already begun elsewhere. Thus, according to this report, 400 million Africans currently live in urban areas, or 40% of the population, against 3% 50 years ago and 1.2 billion in 2050, or 60% of the population.

Africa is thus to date the continent where urban growth is the strongest. The number of city dwellers is constantly increasing (about 5% to 7% per year, a rate twice as fast as its total population). Thus, Cairo (Egypt) and Nairobi (Kenya), with 11 million inhabitants, remains the largest agglomeration.

But, it will be overtaken by Lagos, capital of Nigeria (12.4 million) in 2015, then it will turn Kinshasa (Democratic Republic of Congo), with 12.7 million inhabitants, in 2020. This strong expansion to come, pushes African cities to organize by concentrating their efforts on certain sectors such as real estate, directly linked to this future demographic explosion.

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From the capital of Kenya, Nairobi to the different counties, real estate remains an attractive investment for many. Demand for housing is increasing with rising of urbanization and decentralization, but the government has not been able to meet the annual housing needs.

This has opened up business opportunities for private sector entrepreneur who buy land or Plan To Buy Property In Kenya to meet different types of tastes and budgets.

Kenya’s real estate sector remains a central part of the country’s short and long-term economic growth agenda, giving it a positive outlook. Real estate growth has been fueled by strong economic growth and infrastructure development.

According to HayeOne, one of the top Nairobi-based top real estate developers in Kenya, real estate sector across Kenya continues to grow across the country supported by high annual returns that stands at above 20 percent, high demographic, rapid urbanization at 4.3 percent annually, an expanding middle-class and improved infrastructure.

A latest report indicates that the current sentiment of real estate investors in the sector is neutral during the election period. “Investors and developers should adopt a strategy of waiting for new developments until the end of the election period,” analysts said in their January 2017 report.

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Rising Land prices in Kenya

According to an analysis, land prices in Nairobi’s satellite cities rose by 21.4 percent in the third quarter of 2016, the strongest growth since 2014.

This increase is attributable to the announcement by government planned infrastructure projects, including the Standard Gauge rail commuter train and construction of the planned Western bypass in Nairobi.

Juja, Ruiru and Limuru recorded the largest gains in the third quarter of 2016, with price increases of 43.1%, 42.9% and 34.9% respectively.

These areas are suitable for investors interested in speculation or construction of residential and commercial buildings.

The opposite has occurred in the highly congested satellite cities, such as Ngong, where prices fell by 2.3%.

Land prices in the suburbs of Nairobi marginally by 1.4% as a result of road construction, such as the extension of the Outer Ring road and the completion of the south bypass.

Denholm and Lang’ata was the best-performing suburbs with prices up 9.3% and 7.7% respectively. Even with high prices, the occupancy of apartments and flats is high in these areas that offer opportunities for those looking to build for sale or rent.

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The risk of overproduction

Investor demand is expected to put pressure on land prices in satellite cities of Kenya – Kitengela, Athi River, Syokimau, Ngong, Juja, Thika, among others – that could lead to higher prices.

Developments are expected to increase, which could lead to stagnant rental rates in the short and medium term. In Nairobi, small price increases are expected as investor speculation declines pending elections.

Kenyan Counties are opening up

Prices are expected to rise, driven by investor demand, as decentralization materializes.

Its subregional indices show a preference for county apartments, which accounted for about 60% of units sold during the quarter, compared with 23% and 17% for cottages and bungalows.

In a way, the apartments are more attractive to buyers because of prices and availability of amenities.

The determinants of price and purchase for houses remain the size measured by the floor area, the number of bedrooms, the bathroom and the presence of independent dwellings for staff, as well as parking and availability amenities such as water or related investments such as drilling.

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Most buyers are looking for safe neighborhoods with adequate amenities. For example, houses in closed communities – often very expensive given the superior atmosphere associated with controlled development, security, privacy and landscape value-will dictate price fluctuations.

Similarly, the proximity of social amenities such as shopping centers, paved roads, schools, hospitals and the presence of car parks, among others, contribute significantly to the price of homes.

Demand vs price: Hot spots in Real Estate Kenya

There is a strong demand for exclusive suburbs less built than suburbs characterized by high density of development. Muthaiga leads the suburban pack with a double-digit increase in real estate asking prices (15.8%), followed by Kitisuru (14.2%) and Lang’ata (13.5%).

Single-detached homes, located mainly in low-density suburbs, recorded the best performance in 2016, recording an annual increase of 11.3% in asking prices, indicating that investors looking to take advantage of single-detached homes should look for less populated areas.

Most of these suburbs are exclusively high-end and, like other world markets, high-end areas tend to be the least affected by a stagnant economy.

Kilimani recorded the largest annual price drop of 3.5% due to the price correction of large, recently oversupplied apartments.

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Average asking prices for satellite cities increased by 1.5% in the fourth quarter of 2016 and 8.6% over the year. Similarly, rents increased only 0.2% in the fourth quarter of 2016 and 4% over the year.

Selling and leasing prices in the satellite cities in 2016 recorded the smallest annual increase since 2008, due to the economic slowdown that has resulted in a downturn in the number of transactions in these areas.

Kenya’s rural towns – New frontier for real estate developers

Kenya's rural towns - New frontier for real estate developers

High Real Estate potential suburbs in Kenya

  • Thindigua (Kiambu road),
  • Kiambu, south B, south C,
  • Kabete,
  • Komarock,
  • Imara Daima,
  • Membley,
  • Buruburu,
  • Rongai,
  • Waiyaki road (Uthiru, Regen, Kinoo, Kikuyu),
  • Mbagathi road,
  • Ngong road to Langata.

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Upscale Suburbs

  • Kileleshwa,
  • Kilimani,
  • Lavington,
  • Westlands,
  • Spring Valley,
  • Riverside,
  • Milimani (Kisumu),
  • Milimani (Nakuru),
  • Runda,
  • Karen,
  • Park,
  • Parkways,
  • Ridgeways,
  • Muthaiga,
  • Loresho,
  • Kitisuru,
  • Adams Arcade,
  • Nyali,
  • Mountain View,
  • Nyari.

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High Potential Kenyan Satellite Cities

  • Athi River,
  • Mlolongo,
  • Mavoko,
  • Nakuru,
  • Ngong,
  • Ruaka,
  • Syokimau,
  • Embakasi,
  • Kahawa Wendani,
  • Thika,
  • Mtwapa,
  • Utange,
  • Kitengela,
  • Kiembeni,
  • Nyeri,
  • Likoni,
  • Eldoret,
  • Ruiru,
  • Kilifi,
  • Thika Road (Kasarani, Roysambu, Ruaraka),
  • Meru,
  • Bungoma

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The role of real estate agency

Real estate agencies are a kind of mandatory passage for any real estate investor looking to invest in real estate Kenya. Their mission is to give information on the apartments and property, or in case you want to buy a home in Kenya or Buying Real Estate Property in Nairobi . In many African countries, their arrival has brought order to this sector, which a few years ago was disordered. Several real estate agencies bring their expertise to the continent .