Kenya has been listed among the top global destinations for super-rich Africans seeking to buy a second home, a newly released wealth report says, offering insight into the continued rise in prices of luxury homes in Nairobi and the coast.
Property consultants Knight Frank made the finding in its latest Wealth Report, which says that prime residential houses in Nairobi are currently priced at $800,000 (Sh82 million) or more.
“Interestingly, Kenya is among the top-five most popular second-home locations for Africa’s ultra-high-net-worth individuals,” Knight Frank says in the report.
Of the rich Africans surveyed, 75 per cent are eyeing a second home in the UK, 50 per cent in South Africa, 32 per cent in Kenya, 18 per cent in Nigeria and 16 per cent in Mauritius.
Citizens of South Africa, Mauritius, Uganda, Tanzania, Nigeria and Ghana are among the continent’s super-rich — defined as having a minimum net worth of $30 million (Sh3 billion) excluding primary residence — who are eyeing luxury homes in Kenya.
The foreigners have a preference for houses in Nairobi and at the coast, Knight Frank Kenya’s managing director, Ben Woodhams, said, adding that a residence in Nairobi is seen as enhancing the convenience of conducting business for the globetrotters while a coastal home is largely for vacation.
The houses also offer good returns in terms of rental income and capital appreciation for those buying for investment. Knight Frank says the prime residential units generate average rental yields of six per cent in Kenya shilling terms.
Rents for such upmarket homes are priced from Sh250,000 per month for apartments and Sh300,000 for townhouses.
Mr Woodhams said it was easier for foreigners to invest in Kenya’s real estate market, a fact that has enhanced the prices of beachfront houses compared to those dotting the coastline of Tanzania that remains less accommodative of foreign capital.
Besides Africans, Kenya’s upscale houses are also popular with the rich from outside Africa, including the UK.
The consultancy firm says four per cent of the global super-rich look to own homes in Kenya, adding that 63 per cent of the UK’s wealthy citizens fancy owning a house here.
Some 16 per cent of wealthy South Africans are also likely to acquire homes in Kenya followed by Spanish, Mauritians and Americans (11 per cent) and Ugandans, Tanzanians, Nigerians, Ghanaians, Swiss, French, Canadians and Lebanese (five per cent).
Boon for developers
Purchases by foreigners add to the strong demand from rich Kenyans, helping to raise prices in the local luxury homes market in what has seen developers reap large gains.
Knigh Frank says prime residential houses in Nairobi are currently priced from $800,000 (Sh82 million). More units are now priced above the Sh100 million mark in locations like Nairobi’s Muthaiga and Karen, and at the coast (Diani, Malindi and Watamu).
The prime locations are popular because of controlled development and relatively better infrastructure.
Knight Frank says Kenyans with a net worth of at least $1 million (Sh102 million) are increasing their investment in property, with 63 per cent eyeing residential, 56 per cent offices, 31 per cent retail, 25 per cent leisure and 13 per cent industrial.
“Over the next two years, 46 per cent of resident Kenyan high-net-worth individuals (HNWIs) are likely to buy additional homes within the country, while 43 per cent are looking at outside the country,” the consultancy firm says.
“In addition, 59 per cent of HNWIs in Kenya are looking to invest in commercial properties locally, while 44 per cent are looking to buy abroad.”
Real estate investment
Knight Frank says Kenya’s super-rich typically own up to three homes (primary and second homes) on average, much as their global and Africa counterparts.
A majority of them own homes locally (74 per cent), in Europe (74 per cent) and North America (16 per cent), while five per cent have bought houses in the Middle East.
High-net-worth Kenyans allocate the largest portion of their wealth (28 per cent) to real estate investments with an emphasis on capital preservation, with the individuals also gaining from rental income and price appreciation.
“Kenyan HNWIs clearly realise the long-term stability that property investments offer in an otherwise volatile market together with the good returns that the sector has demonstrated in the past,” Mr Woodhams said.
The growing penchant for local luxury houses has seen developers focus on this segment, a trend that saw prices fall 2.1 per cent in 2016 due to oversupply of the high-end units.
Knigh Frank says the price decline is temporary, attributing it to a wait-and-see stance adopted by potential buyers ahead of the General Election in August.
“With the upcoming election, we have noted a slow-down in development. This will allow the market to re-absorb the oversupply, which will reverse the marginal price decline,” Mr Woodhams said, adding that the price decline makes it more attractive for trophy house hunters.