Capital Markets

Wealthy Kenyans rush for London prime properties


Home ownership is pursued almost as a right in Britain but the housing market has a history of boom and bust -- and fears are growing of a new bubble.

Wealthy Kenyans are investing millions of shillings in London’s real estate market, where they are taking up luxury apartments with price tags of up to Sh32 million each for one-bedroom units.

Seer Acquisitions, a real estate selling agency that has been wooing Kenyan investors says Nairobi property buyers have increased to account for up to one-fifth of its global clientele base.

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The buyers are mainly elite Kenyans seeking London residential homes or overseas investment.

“Sales from Nairobi on a global scale can account for around 20 per cent of an entire project in some cases,” said Claire Collier, the Seer Acquisitions sales director in charge of Middle East and Africa in an interview on Monday.

She estimated that so far Kenyans had participated in sales worth Sh1 billion by the agency, but declined to disclose the number her local clients terming it “sensitive” information.

The London property market, which is recovering from the 2008 global financial and property market crises, has attracted huge foreign investor interest in recent years.

In a report published earlier this year, property consultancy firm, EC Harris, said more than 15,000 homes in developments worth more than £38 billion are due for completion in London’s most expensive neighbourhoods in the next 10 years.

According to an article by Reuters based on the EC Harris report, the total floor area covers almost 20 million square feet - equivalent to the size of the London Olympic park — and includes properties in upmarket Mayfair, the City of London financial district and the south bank of the River Thames.

Reuters said prices for London luxury homes have surged in recent years after economic turmoil in Europe and political uprisings across North Africa drove investors to the relative safety of central London property.

The cost of central London homes rose 1.8 percent in the three months to August, the weakest quarterly growth since November 2010 according to property consultant Knight Frank.

A steady rise in house prices in Kenya’s major cities and towns and nearly stagnant rents have depressed rental yields for investors in residential housing, with experts estimating the payback period at more than 18 years in the formal market.

While the London homes sell at multiples of the Kenyan comparative, the rental income that they could generate is much higher to deliver a more attractive yield.

Rental yield is a measure used to compare the income generated from a property and its market price.

Since January, local newspapers have been carrying advertisements inviting Kenyans to buy property in places such as Dubai, India and South Africa with the promise of good returns.
Ms Collier estimates that a single bedroom apartment in prime neighbourhoods in London generates a weekly rental income of equivalent of Sh60,000.
Seer Acquisitions is currently advertising for sale of high-end apartments in London dubbed Stanmore Palace, where prices for a one-bedroom house start from Sh32 million.

The luxurious housing development consists of 55 one, two and three-bedroom apartments in London.

The most expensive Kenyan homes with comparable features are selling at about Sh13 million for a one-bedroom unit in the upcoming luxury apartment block in Westlands suburb dubbed Le Mac.

Ms Collier said that buyers in the past projects had been a mixture of Indian Kenyans and indigenous locals, who could also be buying homes to serve as accommodation for their children studying in the UK.

Daniel Cheruiyot, the head of valuation at Regent Management, a real estate consultancy, said that the London market is obviously more attractive for buyers seeking stable income streams from rent.

“Mature markets offer higher rental yields than emerging markets because both values and rents are stable,” he said adding, in developing economies, property prices tend to rise faster than the rent they can generate.

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