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Residential land prices in affluent suburbs of Kampala falls

Residential land prices in Kampala’s affluent suburbs dropped by approximately 10% in the second half of 2022

The residential pipeline activity remains high, with apartment units in Naguru, Kololo and Nakasero coming online in the next 2 years

Kampala, Uganda | THE INDEPENDENT | Residential land prices in Kampala’s affluent suburbs dropped by approximately 10% in the second half of 2022 owing to an increased supply of re-development plots against low demand.

The country’s developers, who typically make up most of the land purchasers in the affluent suburbs, were negotiating or forming joint ventures to reduce costs associated with redevelopment, according to the latest report by Knight Frank, the property management firm.

“This is also causing the market prices to correct and adjust accordingly to match the rental rates being achieved,” the report notes, adding that the leasing activity proved resilient, with an uptick in inquiries, on the back of the opening of economies globally, and growing activities in the oil and gas sector.

This vibrancy, however, soon tapered off, with growing uncertainties as a result of global geopolitical conflicts. The average prime residential rents remained stable on a year-on-year comparison, while occupancies increased slightly by 2%.

Landlords were developing larger more expensively serviced units for sale in Kololo, at price ranges between $500,000 and $700,000 for apartment sizes ranging from 300 to 500 square meters.

“It is becoming increasingly evident, however, that the Ugandan market is yet to realize effective demand for residential units at this price range. The sweet spot for prime residential units is between $250,000 and $350,000 for an apartment in the prime suburbs,” notes the report in part.

Meanwhile, the residential pipeline activity remains high, with apartment units in Naguru, Kololo and Nakasero coming online in the next 2 years estimated at approximately 500 units. The developers are both new and existing players in the market.

The report notes that most of the new developers are coming into the market to try and capitalize on the oil and gas buzz as speculators. Some of the players, however, are taking longer to complete the projects, an aspect that is influencing potential buyers to negotiate prices and request better long-term payment methods, especially for purchasers who are avoiding loan facilities.

Surprisingly, there is still a lack of product selling at between $100,000 and $150,000 in the prime and semi-prime locations in a radius of approximately 10 – 12 kilometres from the city centre like Ntinda, Muyenga, Makindye, Mutungo, Luzira, Mbuya, Kyambogo, Mengo, and Rubaga.

The report adds: “These locations have effective demand at this price bracket, but not the required quality and availability of a product,” notes the report, adding that effective demand for middle and affordable housing continues to grow steadily, especially in Nakawa Division, Kajjansi town council and Kira municipality boosted by access to infrastructural services such as schools, health facilities, banking services and restaurants.”

In the retail office market, occupier activities were vibrant at the start of the year, following the signing of the final investment decision and the full reopening of the economy. Strong demand for best-in-class office space against a backdrop of limited supply in this segment persisted, especially from financial institutions and oil and gas- affiliated organizations.

On the other hand, industrial space requirements remained relatively stable in the second half of 2022, despite the high inflation, dry weather conditions, currency depreciation, and rising costs of finance.

The report notes that warehouse leasing dominated the inquiries, at approximately 70%, while sales inquiries accounted for 30%. Of the sales inquiries, 97% were for land, with size requirements ranging between 5-15 acres, predominantly in the Kampala Industrial Business Park (KIBP)-Namanve, which offers suitably sized industrial land options for greenfield projects.

According to the report, this demand, especially in the KIBP- Namanve has been largely attributed to the park’s strategic location and proximity to Uganda’s main business hub (approximately 15Km from Kampala’s City Center), location along the corridor to the Kenya border, government incentives to boost industrialization as well as the strategic future added advantage like connectivity to the planned Southern by, Bukasa Port, and the Standard Gauge Railway.

Going forward, demand for housing in secondary markets, away from the prime suburbs, will continue soon. Similarly, the general outlook for the office market remains positive, albeit hinged on demand from players in the oil and gas sector, financial services, and professional services.

However, the current deficit in the supply of grade A office space is projected to persist in the short term, given that most office buildings (for rent), currently under construction are expected on the market towards the end of 2023 or 2024.

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