BY SILAS APOLLO
Satellite towns around Nairobi and in other parts of the country are becoming the preferred destinations for most Kenyans, with rental and property prices increasing in the last four months of 2023.
This is according to a report by real estate firm HassConsult which shows that in the first quarter of 2023, rental income for most property owners in estates outside of Nairobi and other urban areas experienced a sharp rise.
The report shows that apartments located in the satellite towns recorded rental return gains of up to 5.9 % over the first quarter of 2023, a pointer to what could be an influx of tenants to these regions.
The properties also saw rental return gains of up to 22.8% year on year growth annually, made more attractive by the underperformance of other asset classes such as bonds and equities.
“Nearly all towns posted positive growth on apartment rental pricing highlighting the increasing occupancy rate of apartments targeted at renters with a monthly budget between Sh25,500 and Sh50,000,” the report says.
HassConsult’s head of development consulting and research, Sakina Hassanali, says that the trend could be an indication of a growing appetite for housing in areas outside of the major urban centres, including Nairobi and other towns.
“The demand for affordable rental properties, particularly apartments in satellite towns, has impacted the overall returns, as indicated by rental yields and capital gains. Apartments located in satellite towns recorded average rental returns of 3.4% over the quarter and 9% annually, respectively,” Ms Hassanali.
She notes that the trend is accelerated by the “underperformance of other asset classes such as bonds, equities, and fixed deposits, making these apartments an attractive investment option.”
Demand for properties and land outside of major urban centres is steadily increasing, as congestion, over-population and degrading amenities as well as high prices push many out of major towns across the country.
According to previous report released by HassConsult, in 2021, land prices in Nairobi’s satellite towns of Kiambu, Syokimau and Kiserian increased at the fastest rate in more than two years because of high demand. Prices of land in those towns jumped by an average of 2.48% in the three months to September 2021.
The rise was an increase from a low of 1.12% in June and a contraction of 0.06% in a similar quarter the previous year.
Of the four satellite towns, Kiserian was the best performer at the time having gained 5.3 % with an acre of land retailing at Sh8.7 million. Other areas such as Kiambu, Ruiru, Athi River, Syokimau as well as Ngong also saw price increases of about 4.8%, 3.9%, 3.8%, 2.7% and 0.1% respectively.
However, the 2023 report paints a different picture – it shows that property prices were static at 0.02%, with mixed performance within different property segments.
Over the quarter, semi-detached houses sales prices dropped by 2.4% as demand continues to wane. In contrast, apartments and detached houses saw prices slightly increase by 0.8 % and 0.7 %.
Experts attribute these increases in costs to inflation adjustments in prices coupled with sustained demand, particularly for detached houses. HassConsult notes that over the last 20 years demand has outpaced supply for detached houses resulting in an increase in sale prices.
“It is worth noting that detached homes now account for only 7.5% of the market, down from 28% in 2016 and over 50% in the early 2000s, while apartments’ market share grew to 64.4 % and semi- detached homes increased to 28.1% during the same period,” says Hassanali.
The average sales price for detached houses has reached Sh48.7 million, while semi-detached homes are currently selling for Sh30.2 million. The average sales price for apartments is Sh15.07 million. The rental market experienced a decline of 0.5 % in average over the last quarter, and decrease of 1.2% over the past year.
“The proportion of detached houses in the property market has steadily decreased over the years, accounting for only 7.5 % of all properties currently, compared to over 50 percent in the early 2000s… rental prices market wide fell an average of 0.5 % over the quarter and 1.2 % over the year with hot spots of growth witnessed in the satellite towns, mostly recording rental price gains,” she says.
