Kenya is among the top five favourite property investment locations for Africa’s super-rich, with nearly a quarter (24%) already owning real estate in the country—coming third after the UK (67%) and US (33%), according to the Attitudes Survey data for The Wealth Report 2018.
South Africa is the fourth favourite property investment location for Africa’s super-rich at 9%. In total, 4% of the world’s super-rich already own property investments in Kenya, led by African, North American, European and Asian HNWIs.
The Attitudes Survey collated responses of 500 of the world’s leading private bankers and wealth advisors, who between them represent over 50,000 clients with a combined wealth of more than US$3 trillion.
Property makes up 43% of Kenyan high-net-worth-individuals’ (HNWIs) investment portfolios, excluding primary residences and second homes. This averages higher than their African counterparts’ 39%.
The majority of Kenya’s super-rich (59%) have invested in real estate in the country, while 27% hold property interests outside the country, according to the Attitudes Survey insights. Respondents to the survey said 42% of their Kenyan clients increased their exposure to property investments in 2017, further indicating confidence in the asset class.
Respondents said 46% of their Kenyan HNWI clients are considering investing in property locally in 2018. This is higher than Africa’s average of 37% and 43% globally of the super-rich who are looking to invest in properties in their home countries.
Kenyan HWNIs are more interested in investing in offices (39%); residential (i.e. hotels, retail, private rented sector/multifamily) and agricultural property at 28%; student accommodation and logistics/warehouses at 22%; infrastructure at 17%; industrial at 11%; and healthcare and retirement housing at 6%.
According to Knight Frank’s 100-city Prime International Residential Index (PIRI 100) published in The Wealth Report, prices of prime residential property in Nairobi weakened by 0.9% in 2017, which was an improvement compared to 2016 when the market recorded a 2.1% drop.
China’s Guangzhou topped the index with a 27.4% growth in prime residential prices, while South Africa’s Cape Town was second with 19.9%. Nigeria’s Lagos was the worst performer, with prices having fallen by 25% in 2017.
Nairobi’s Karen neighbourhood is among a select urban districts whose “location, infrastructure and vibe mean they are set to outperform the competition”. Karen witnessed rapid growth from the early 2000s, with many of the original five- and 10-acre plots developing into modern housing clusters with shared amenities such as club houses, gyms and swimming pools.
This period saw land prices soar from about Sh2.3 million per acre to the current levels of over Sh50 million per acre, where they have now stabilised. Typically, houses currently sell for around Sh80 million to Sh110 million in Karen, although record prices are being achieved for larger stand-alone houses with more substantial gardens.
“This highlights the scale of the issue (succession planning concerns) and helps to explain why private banks and wealth advisers are putting so much effort into helping their clients with succession planning,” the report states.
On education, 49% of the respondents from Kenya said their clients send their children overseas for education. The majority of wealth advisors (67%) expect the percentage to increase.
Wealth managers and advisors said 18% of Kenyan HNWIs already have a second passport or dual nationality, which is lower than the global (34%) and Africa (28%) scores. Only 16% are considering to acquire second passports or dual nationalities—but even this is still lower than the Africa average (27%) and global (29%).
The low percentage is explained by the insight that most Kenyan HNWIs do not intend to emigrate permanently to other countries, with only 6% of wealth advisors affirming this compared to 21% globally and 19% in Africa. This reflects well on their confidence of the country’s economic future.
Nonetheless, Kenyan HNWIs considering to emigrate prefer the US (42%), Canada (32%), UK (26%), Australia (21%), South Africa (11%), and 5% to France, Germany, India, Netherlands and Sweden. At least 3% of HNWIs in Africa would consider emigrating to Kenya.
On philanthropy, Kenyan HNWIs are most likely to support causes in education and environmental issues (50%), job creation/training (39%), disaster/relief emergencies (28%), social issues (equality/human rights) and healthcare/disease control (17%). Education is the top preference globally at 54% and 58% in Africa. Most wealth managers (83%) feel that their Kenyan clients’ philanthropic activities are increasing.