Africa Ecoomy: Nairobi property developers double construction of houses

Property developers in Nairobi, Kenya's capital are building twice as many houses as they were constructing in the last one year.

Most of the houses being built are residential units as developers seek to cash in on high-yields in the sector, according to data from a new economic report from Kenya National Bureau of Statistics (KNBS).

In December 2014, the value of residential properties built in the capital stood at 161 million U.S. dollars. This was more than double the value of properties built in January, which stood at 73 million dollars.

According to the government bureau of statistics, the total value of residential properties constructed in the capital during the year stood at 1.32 billion dollars.

The value of commercial properties constructed in Nairobi, on the other hand, roset too, albeit marginally as at the end of December.

In January 2014, the KNBS data showed that the value of approved commercial building plans by the Nairobi City County stood at 62 million dollars. This rose to 134 million dollars in September 2014 before declining to 93 million dollars in December.

In total, the value of both commercial and residential properties constructed in the capital in 2014 stood at a staggering 2.3 billion dollars. This was a continuation of sustained construction in the city, with real estate remaining the most lucrative sector in the East African nation.

However, not as many buildings were built in Nairobi last year as they were constructed in 2013, where the value of both commercial and residential properties stood at 2.6 billion dollars.

The property sector, according to real estate analysts, has become Kenya's new gold, with land prices rising five-fold and the cost of houses doubling.

The cost of land in Nairobi, according to a report by HassConsult, a real estate consultancy firm, has risen by 535 percent.

Across Nairobi, an acre is being sold at 1.9 million dollars, up from 329,670 dollars in 2007. Prices are, however, steeper in high-end areas, in particular, Upper Hill, where an acre is going for 5.2 million dollars.

Upper Hill has witnessed an increase in construction of both commercial and residential properties, with corporates jostling for space in the area located about 7km from the central business district.

"Land and houses have delivered the highest return of all asset classes in the last seven years," said Sakina Hassanali, head of research and marketing with HassConsult last week.

Of the two, however, it is land that has risen faster than the cost of houses, which have grown by 98 percent in the last seven years.

The rise in the value of land has equally pushed up the cost of both residential and commercial properties, with a three bedroom maisonette in middle-income suburbs going for up to 109, 890 dollars.

"Nairobi will soon be full with only houses," said Antony Kuyo of Avent Properties in Nairobi. "The rate at which houses are being constructed is alarming. If you look around, every space is being filled with residential units."

While massive construction means more business for consultants like him, Kuyo said the sector needs to be regulated.

"If it is not done now, the market will in the near future be very harsh to developers. It will reach a point where there will be more supply of houses than demanded, pushing rent to low levels. Already we are seeing the signs as some apartments remain unoccupied for months." Endi