The Nairobi Metropolis real estate market shows a paradoxical trend, with smaller parcels of land often sold at higher rates compared to larger ones.
According to HassConsult Q3 Land Indexes, certain areas in Nairobi witness higher spending on three-quarter acre plots than on one-acre plots.
Estates like Parklands, Riverside, Upperhill, Westlands and Kileleshwa exhibit this phenomenon.
For instance, from April to June, a three-quarters acre of land was valued at Ksh467.9 million whereas an acre traded at Ksh403.9 million. However, a quarter of an acre in the same estate was valued at Ksh339 million.
Aerial View of the Westgate Mall and other environs on October 30, 2018.
So, what are the driving forces behind this phenomenon?
Preference of Buyers
Kenyans.co.ke established that preference among potential landowners is one of the driving factors.
Speaking to Kenyans.co.ke on Saturday, August 26 real estate expert Arnania Ogutu, opined that several potential developers in Nairobi often sought to buy smaller pieces of land owing to costs in property development.
He asserted that homeowners often seek smaller pieces of land as they are easier to develop compared to constructing a house on a bigger parcel of land. Smaller land sizes typically require less initial investment and entail reduced construction costs.
Homebuyers often weigh the expenses associated with building and maintaining a property as an attractive option in terms of affordability.
Notably, with the increasing construction costs that have been witnessed in the last few months owing to the increased production costs of materials, homeowners are seeking cheaper options.
Therefore, prices rise with increased demand for the smaller pieces of land.
“Some of those seeking to buy the land will definitely choose a smaller piece of land because they are easy to develop and the cost of construction will definitely be lower compared to that of a large piece of land. This could be a contributing factor to this trend,” he stated.
Photo of the real estate apartments owned by Cheriez Properties Limited in Kitengela.
Cheriez Properties Limited
Increased demand for small land prices leads to scarcity of the said parcels. Automatically, when a scarce product – in this case, land- is in high demand- prices will automatically go up.
On the other hand, some estates have seen smaller pieces of land sold completely, leading to the availability of large trucks of land above one acre.
According to Ogutu, locations with better infrastructure, such as roads, malls, and schools, drive up prices for smaller land parcels compared to larger land in less developed areas.
“Everybody will only look for land where there is a road and other key infrastructure because of accessibility. This will obviously lead to an increase in the demand,” Ogutu explained.
Sakina Hassanali, the Head of Development, Consulting and Research at HassConsult, a realtor, concurred with Ogutu, adding that infrastructural projects such as the Nairobi Expressway and other key infrastructure were driving the cost of land.
“Land pricing is a function of its development potential. Therefore, land in areas with strict development density guidelines tends to have a price ceiling while land in areas that are subject to less rigidity around the densities tends to increase in pricing in tandem with the approved density,” Hassanali stated in the Q3 report.
A photo of a section of Nairobi’s Upperhill estate taken on May 4, 2020.
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Upper Hills holds the record for the most expensive acre of land in Nairobi, valued at Ksh478 million, followed by Westlands at Ksh452 million.
Other highly valued areas include Parklands (Ksh403 million), Kilimani(396 million), Riverside (Ksh320 million), Kileleshwa (Ksh293 million), Gigiri (Ksh231 million) Lavington (Ksh225 million), Muthaiga (Ksh213 million) and Nyari (Ksh110 million.