Kenya’s super-rich are buying more luxury homes in the country, signaling bargain-hunting as prices for trophy houses soften, according to data compiled for The Wealth Report 2019.
Some 18% of Kenya’s high-net-worth individuals’ (HNWIs) – those with a net worth of US$1 million excluding their primary residences – bought new homes in the country in 2018, with only 8% purchasing houses abroad. According to The Wealth Report’s Attitudes Survey, 22% of Kenya’s wealthy plan to buy new homes in the country in 2019/2020.
First and second homes make up 45% of total wealth for Kenya’s super-rich, with the HNWIs owning an average of 2.7 homes, according to The Wealth Report. In comparison, South African HNWIs own an average of four homes each.
The super-rich took the opportunity to snap up new homes during the year as luxury residential prices softened amid an oversupply in the high-end market segment, tighter liquidity and a general market correction, making it a buyers’ market.
Nairobi’s ranking slipped to 92nd in the Knight Frank Prime International Residential Index (PIRI), from 75th in the previous year, as prime residential prices softened by 4.5% in 2018. Notably, prices in prime property markets have come under pressure from lingering oversupply in the past year.
This in addition to other regulatory and macro-economic factors have been building up to the slow-down. South Africa’s Cape Town is ranked 28th following a 3.8% price growth in 2018. Manila, Philippines, posted a 11.1% growth, topping the PIRI which tracks luxury home price movements in 100 locations.
Despite the price drop last year, luxury property values in Nairobi have appreciated by 38% since 2010, according to Knight Frank Kenya research.
“As a result of the oversupply, developers have had to deliver higher specification property at lower prices. A relatively unfavourable economic environment has also affected demand,” said Ben Woodhams, Knight Frank Kenya Managing Director during the event.
“The price correction, however, presents a good opportunity for high-net-worth individuals to buy high-end properties at discounted prices,” he added.
Data provided by Global Data Wealth Insight exclusively for The Wealth Report showed the number of HNWIs in Kenya increased to 9,482 in 2018 from 9,176 in the previous year, and is projected to increase by 22% to 11,584 by 2023.
Respondents to the Attitudes Survey said their Kenyan clients have allocated 25% of their investment portfolios to equities, 22% to investment properties, 22% to cash or cash equivalents, 20% to bonds, 3% to private equity, 3% to luxury investments (art, wine, classic cars etc.), 1% to gold, with the remaining 4% going into other asset classes.
The survey showed that 19% of Kenya’s HNWIs have second homes outside the country, with only 7% looking to buy outside the country in 2019/2020. Those looking to buy outside the country are most likely to buy in the UK (65%), Canada (35%), US (30%), UAE (15%), Australia, Germany and India (10%), South Africa and the Caribbean (5%).
Wealth managers and advisors said 39% of their clients have property investments in the country, while 22% have invested in foreign property. Up to 18% made additional property investments in the country in 2018, with 15% buying outside Kenya.
Respondents said 29% of their clients are looking to invest in the country’s property markets in 2019/2020, while 17% are exploring abroad, with the likely destinations being the UK (55%), UAE (25%), US (15%), Australia and Canada (15%), Germany (10%), and South Africa, Spain, India, Ukraine and Ireland (5%).
Investment properties exclude primary residences, i.e. first and second homes, which are not for income-generating purposes.