Kenya’s middle class and the ultra-rich have turned to the UK to buy houses for renting out as they diversify their investments.
A Britain-based property investment dealer, Mark Pearson says Kenyan buyers are spending an average of 210,000 pounds (Sh30.7 million) on a house in Birmingham, Manchester, London, Liverpool, and Leeds in the UK.
“We are getting a lot of interest from East Africa and predominantly through Kenya. Our average purchase from a Kenyan client is 210,000 pounds,” said Mr Pearson, adding that they are also seeing an increase in the number of Kenyans inquiring about the homes.
“Most are business people, and middle-class Kenyans, which is exciting. We are seeing a spike in a lot of younger middle class or upper-middle-class and not just the ultra-elite as they are aware the world seems to have shrunk a little bit.”
He deals in one, two and three-bedroom apartments ranging from 100,000 pounds (Sh14.6 million) to two million pounds (Sh292.3 million).
The company which has mixed properties has been mainly selling apartments in the UK to Singaporeans, Hong Kongers, and those from the UAE.
With the number of wealthy Kenyans increasing every year and many seeking second homes outside the country, developers from Dubai and the UK have been on a charm offensive to recruit buyers.
The low returns on house investments in Kenya have also made buyers look elsewhere.
“We focus where we get a lot of money that is why we are here. Kenya has been doing great and it’s our focus because making money out of a property is a concept that is understood,” Mr Pearson said.
Buyers are allowed to invest 25 percent of the amount with a mortgage company or bank paying the rest. The apartments are located in major cities in the UK where the owners can rent them out to locals or foreign Kenyan students studying in the UK.
“At the moment, apartments are delivering much higher returns. We are targeting areas that have a big difference between property price and affordability; places where the prices can grow,” he said.
Mr Pearson said the returns are also pegged on the high incomes of residents in the towns which is also seen as a differentiating factor with investments in the Kenyan market.
“One of the challenges that have we have seen in the market is that you can have a comparative property price in Mombasa, as you do for instance in Birmingham. However, you have about 10 times more affordability in Britain since your tenant is on average wealthier in somewhere like Birmingham than Mombasa, which allows the rents to continue in the property prices to continue growing,’’ he said.
Reuters has this month reported that asking prices for property in Britain put on sale between mid-April and mid-May rose by 2.1 percent after a 1.6 percent rise the month before. It marked the biggest May increase since 2014.
The jump is due to a lack of new homes coming into the market to match the demand.
“The undersupply in those areas sees the property get high occupancy rates and increased rents increase property prices,’’ Mr Pearson adds.
Investors in the UK also get tax relief of up to 12,500 pounds (Sh1.83 million) on the first investment, he says, and Kenyan investors are aware of this.
The poor performance of stocks and real estate has seen the wealthy seek new assets including contemporary art, whisky, watches, handbags, and sneakers.
Traditionally, property assets have been the preferred investment class. For others, they have started scouting for better real estate markets.
The Kenyan homes market is on a recovery path from Covid-19 economic hardships, however, according to Mr Pearson, the challenge in Nairobi is the pricing of property compared to the average salaries of buyers and tenants.
The dealer, who is setting up offices of his company, Baron & Cabot, to tap into the market, says for a house in UK, for instance, a return on investment ranges from 12 percent to 16 percent per year.