Real estate property comprises of vacant land or built up area within land. Both of these appreciate at different rates. Its important to know these rates to assist in which area between vacant land vs built up land to zero in on your real estate investment.
Vacant land appreciation rate is different from built up area appreciation rate.
Upper Hill area comparison.
Lets check the appreciation rate for Vacant land in Upper Hill area of Nairobi for the last 5 years.
1 acre in upper hill area costed kes 200 million 5 years ago. It now costs kes 600million for the same. This is a 40% per annum increase in appreciation rate.
Built up area rate.
For built up area in Upperhill, floor space was selling at kes 130,000 per m2 around 5 years ago.
Current sale price per square meter in Upper Hill for office space is around kes 200,000.
This represents an appreciation rate of 10% appreciation for built up office space.
This is closer to the rate of appreciation of building materials in Kenya.
The rate of appreciation of vacant land, at 40% annually is much higher than the rate of appreciation of built up area, at 10%.
Therefore, someone holding vacant land will have a higher income from capital gain compared to someone owning built up area.
The best solution to gain from both of these scenarios is to buy land,then build steel prefabricated housing structures which can be able to bring in monthly rent. The land can then be sold out at a later day or mortgaged to a bank so as to derive the capital gains out of it, assuming that a bank can lend up to 80% of the land value, which over time will have appreciated handsomely.
The structure on it, if made out of steel prefabricated panels,which available at www.a4architect.com , can then be easily relocated to another site without loosing its value.
Separating built up area from vacant land this way will enable one to reap the benefits of wise real estate investment in Kenya.
Architect Francis Gichuhi Kamau, B.Arch. U.o.N. M.A.A.K[A]