Tough economy cools Kenyans' huge appetite for buying land

Despite Kenyans' long-held love affair with land, economic headwinds are putting a damper on the country's property market.

The Hass Land Price Index for the fourth quarter of 2024 published yesterday, reveals a significant slowdown in land price growth, particularly in Nairobi's satellite towns.

For years, Kenyans have viewed land as a safer haven, a place to build a dream home or a lucrative investment.

This trend fueled a boom in satellite towns surrounding Nairobi, offering a more affordable alternative to the pricier city centre. However, the good times seem to be over, at least for now.

The index showed a meagre 1.9 per cent increase in land prices within Nairobi's satellite towns during the last quarter of 2024.

This marks the slowest growth since June 2023 and a significant drop from the previous quarter's 3.02 per cent rise according to the Hass Index. 

The slowdown is attributed to Kenya's tough economic climate. Job losses and high interest rates have squeezed the pockets of potential buyers, especially middle-class families who were the driving force behind the satellite town property boom.

"Periods of economic uncertainty can lead to developers delaying land purchases, reducing demand and ultimately impacting prices," explained Ms Sakina Hassanali, Head of Development Consulting and Research at HassConsult.

The slowdown is particularly evident in towns like Thika and Mlolongo, where land price growth plummeted from a robust 6.3  per cent and 6.6 per cent in the third quarter to a sluggish 0.9  per cent and 1.1 per cent in the fourth quarter, respectively.

The situation is slightly different in Nairobi's suburbs. While growth remained modest at 1.7 per cent, it held steady compared to the previous quarter's 1.6 per cent increase.

Areas like Parklands, Upperhill, Spring Valley, and Kileleshwa led the pack with price gains exceeding three per cent.

“Nine out of the 14 towns tracked recorded a deceleration in price expansion, led by Thika and Mlolongo where growth fell from 6.3 per cent and 6.6 per cent in the third quarter to 0.9 per cent and 1.1 per cent, respectively, in the fourth quarter,” said the survey.

 “Kiambu (-0.3) and Ngong (-0.2 per cent) recorded negative growth, while notable declines were also seen in Ruiru (4.9 to 3.2 per cent), Syokimau (4.8 to 3.4 per cent) and Kiserian (4.7 to 2.0 per cent).”

Satellite towns have in previous quarters seen impressive growth driven by both private and commercial property developers, but a tough economy which came with job losses, and high interest rates has impacted would-be land buyers.

The report suggests that the Kibaki era infrastructure-driven price hikes witnessed in recent years in satellite towns like Thika, Kiserian, Mlolongo, and Syokimau might be reaching their peak. 

The sharp price jumps experienced earlier seem to be unsustainable in the current economic climate.

While land remains a cherished asset for many Kenyans, the property market is not immune to economic realities.

The slowdown serves as a reminder that even the most prized possessions can be affected by broader economic trends, shows the Hass research.