Cytonn Report #6 focused on Nairobi household settlement characteristics in the satellite towns around Nairobi. We saw people in the satellite towns take on average 3 years or less to buy land, build and settle down. Given Cytonns key focus towards providing middle income housing, this week we focus on Ruaka, which is an attractive real estate investment satellite town. The town is close to Nairobi and has two prime commercial retail developments within its vicinity Two Rivers and the Rosslyn Riviera mall. Research by our Real Estate team shows that Ruaka developments deliver an average rental yield of 5.1% p.a. and potential total returns of more than 21% p.a.
Following our market research on Ruaka in August 2015, highlighted in Cytonn Report #34, a supplementary study was conducted to reaffirm on the performance of the market in the last 6 months. We widened our scope of research to include one-bedroom apartments, as well as increase the number of comparable developments. The market study focused on properties built within the last 5 years along Limuru Road where Cytonn is developing The Alma.
Ruaka was historically a rural shopping centre with the hinterland being utilized for agricultural purposes. However, the on-going relaxation of zoning restrictions that is in line with strategic planning will allow for more comprehensive and high-density development of both residential and commercial properties. According to the data from KNBS on the 2009 Census, the population of the larger Karuri area stood at 129,000 from the 2009 which is a 41.7% increase compared to the 1999 census. It is projected that by 2025 the population will be 176,191 translating to an annual population growth of 1.97%. Ruakas population is a mix of both local middle income earners as well as foreign residents.
As per our research on uptake of housing units in Nairobis satellite towns, Ruaka has the highest uptake at 93% compared to an average of 73% for the other satellite towns.
Ruakas Residential Market Research
Demand for housing has led to an increase in land and property prices in areas around Nairobi Metropolitan Region. Land in Ruaka is priced at approximately Ksh 100 Million per acre and this is relatively expensive in comparison to other satellite towns such as Ngong, Athi River and Ruiru. Prime land with frontage to tarmac road is scarce in the town resulting to an increase in linear developments along Limuru road towards Ndenderu.
The market research focuses on the following areas:
- Sizes of apartments: this is to be used in unbiased comparison of the rental and selling prices as well as the developments trends in the area
- Selling prices of apartments: this will give an overview of the average exit prices of apartments in the area
- Rental rates for various units will inform on the average rental prices, and yields for investment analysis
- Uptake of the apartments indicates the rate at which apartments have been bought hence indicating the attractiveness of residential property in the area
Research Findings:
| 1 bedroom apartments |
|
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| Name of Development |
Year of Completion |
Size of Unit (SQM) |
Current Selling Price per SQM (Ksh) |
Rent per SQM (Ksh) |
Uptake (%) |
Yield (%) |
CAP Rate (%) |
| Junica Apartments |
2013 |
43.0 |
86,047 |
419 |
94 |
5.5 |
14.7 |
| Ruaka Ridge |
2015 |
63.0 |
99,206 |
397 |
100 |
4.8 |
13.9 |
| Makao Roselyn |
2015 |
58.5 |
94,017 |
342 |
85 |
3.7 |
15.6 |
| Ruaka Spearnet |
2015 |
45.0 |
400 |
94 |
3.9 |
||
| Elite Heights |
2013 |
58.0 |
379 |
100 |
5.1 |
||
| Average |
53.5 |
93,090 |
387 |
94.6 |
4.6 |
14.7 |
|
| Total Return |
19.3 |
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| One bedroom apartments have the highest price per square metre at Ksh 93,090 as compared to two and three bedroom apartments at Ksh 91,307 and Ksh 84,214 respectively |
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| 2 bedroom apartments |
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| Name of Development |
Year of Completion |
Size of Units (SQM) |
Current Selling Price per SQM (Ksh) |
Rent per SQM (Ksh) |
Uptake (%) |
Yield (%) |
CAP Rate (%) |
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| Mulberry |
2013 |
90.0 |
100,000 |
444 |
100 |
6.1 |
9.5 |
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| Temus |
2012 |
107.0 |
79,439 |
374 |
95 |
5.4 |
19.6 |
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| Runda View |
2015 |
86.0 |
113,372 |
465 |
100 |
4.9 |
17.9 |
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| Ruaka Ridge |
2015 |
92.0 |
76,087 |
408 |
94 |
5.8 |
14.8 |
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| Makao Roselyn |
2014 |
88.9 |
95,613 |
450 |
85 |
5.1 |
16.6 |
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| The Pearl |
2016 |
108.0 |
83,333 |
85 |
|||||||||
| Glenwoods Gardens |
2017 |
88.0 |
71,023 |
96 |
|||||||||
| Average |
95.3 |
91,307 |
428 |
93.2 |
5.45 |
15.7 |
|||||||
| Total Return |
|
|
|
|
|
21.1 |
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| 2 bedroom apartments have the highest yields at 5.45% as compared to 1 and 2 bedroomed apartments at 4.6% and 5.2% respectively. They are thus the best option for investors seeking to let their property in the area |
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|
3 Bedroom apartments |
||||||||||||||
| Name of Development |
Year of Completion |
Size of unit (SQM) |
Current Selling Price per SQM (Ksh) |
Rent per SQM (Ksh) |
Uptake (%) |
Yield (%) |
CAP rate (%) |
|||||||
| Mulberry |
2013 |
110 |
109,091 |
455 |
100.0 |
4.7 |
18.8 |
|||||||
| Runda View |
2015 |
104 |
103,365 |
481 |
84.0 |
4.7 |
15.7 |
|||||||
| The Pearl |
2016 |
123 |
79,675 |
390 |
58.3 |
5.6 |
19.1 |
|||||||
| The Pearl |
2016 |
131 |
79,389 |
344 |
93.8 |
4.9 |
17.9 |
|||||||
| Makao Roselyn |
2014 |
109 |
87,156 |
459 |
82.0 |
5.6 |
17.8 |
|||||||
| Makao Roselyn |
2014 |
122 |
90,164 |
410 |
82.0 |
4.9 |
18.4 |
|||||||
| Makao Roselyn |
2014 |
162 |
79,938 |
463 |
82.0 |
6.2 |
17.3 |
|||||||
| Temus |
2012 |
107 |
88,785 |
430 |
95.0 |
5.5 |
19.1 |
|||||||
| Haven Park |
2012 |
115 |
86,957 |
435 |
85.0 |
5.1 |
16.6 |
|||||||
| Glenwoods Gardens |
2017 |
120 |
62,500 |
94.0 |
||||||||||
| Average |
120.3 |
84,214 |
426 |
85.6 |
5.2 |
17.9 |
||||||||
| Total Return |
23.1 |
|||||||||||||
| 3 bedroom apartments have the highest price appreciation at 17.9% as compared to 14.7% and 15.7% for one and two bedroom apartments respectively. |
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Summary of the research findings can be summarised as below:
| 1 BR |
2 BR |
3 BR |
Average |
|
| Average size (SQM) |
54.5 |
95.3 |
120.3 |
|
| Average Monthly Rent per SQM (Ksh) |
387 |
428 |
426 |
|
| Price per SQM (Ksh) |
93,090 |
91,307 |
84,214 |
89,537 |
| Uptake (%) |
94.6 |
94.0 |
90.5 |
93.0 |
| Yield (%) |
4.6 |
5.4 |
5.2 |
5.1 |
| Price Appreciation (%) |
14.7 |
15.7 |
17.9 |
16.1 |
| Total Return (%) |
19.3 |
21.1 |
23.1 |
21.2 |
Performance Comparison Last 6 Months:
A follow up on a research conducted in August 2015 shows that there has been appreciation of rent and price of units on the subject properties that had been used. On average, the prices and rental rates have increased at an annual rate of 6.8% and 15.5% respectively over the last 6 months. Investors who own apartments in Ruaka are likely to have an annual total return of 22.1%
| Type of Apartment |
Rent Appreciation |
Price Appreciation |
Increase in Uptake |
Total Return |
| 2BR |
19.0% |
7.0% |
6.5% |
21.1% |
| 3BR |
12.0% |
6.6% |
1.8% |
23.1% |
| Average |
15.5% |
6.8% |
4.2% |
22.1% |
Ruaka is in the rising phase of the real estate market evidenced by high returns and appreciation of both the rental rates and prices. The zoning regulations are favourable to property developers who densify their developments hence reaping high returns. Ruaka is thus ideal for investment in residential apartments with a mix of one, two and three bedroom units. Developers should however differentiate their developments through provision of other social amenities.
Cytonn Real Estate has ventured into the Residential market in Ruaka through the proposed Alma. The 408-unit mixed-use development project is located in Ruaka town near Joyland supermarket. The ground breaking for the development is scheduled to take place in March 2016. The breath-taking development will offer a retail centre as well as 1,2 and 3 bedroom apartments. In addition, there will be amenities such as a nursery school, a gymnasium and elevated gardens. The development has provision for adequate parking space for both residents and visitors. For details, see the development at Alma Video and brochure at Alma Brochure .
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Disclaimer: The views expressed in this publication, are those of the writers where particulars are not warranted- as the facts may change from time to time. This publication is meant for general information only, and is not a warranty, representation or solicitation for any product that may be on offer. Readers are thereby advised in all circumstances, to seek the advice of an independent financial advisor to advise them of the suitability of any financial product for their investment purposes.
