Kenya’s Super-rich Are “Hiding” Their Cash in New Homes

Approximately 18 percent of Kenya’s high-net-worth individuals’ (HNWIs) bought new homes in the country in 2018, with only 8 percent purchasing houses abroad according to Knight Frank’s Wealth Report 2019.

As more super-rich individuals buy more luxury homes in the country, Knight Frank attributes the move to be signaling bargain-hunting as prices for trophy houses soften.

According to the report, 22 percent of Kenya’s wealthy plan to buy new homes in the country in 2019/2020.

First and second homes make up 45 percent of total wealth for Kenya’s super-rich, with the HNWIs owning an average of 2.7 homes, according to Report. Their South African counterparts 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 percent in 2018. South Africa’s Cape Town is ranked 28th following a 3.8 percent price growth in 2018. Manila, Philippines, posted an 11.1 percent 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 percent since 2010, according to Knight Frank Kenya research.

Data provided by GlobalData WealthInsight 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 percent to 11,584 by 2023.

From a survey conducted by the firm, 25 percent of HNWIs in Kenya have allocated their investment portfolios to equities, 22 percent to investment properties*, 22 percent to cash or cash equivalents, 20 percent to bonds, 3 percent to private equity, 3 percent to luxury investments (art, wine, classic cars etc.), 1 percent to gold, with the remaining 4 percent going into other asset classes.

The report revealed that 19 percent of Kenya’s HNWIs have second homes outside the country, with only 7 percent 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 percent), Canada (35 percent), US (30 percent), UAE (15 percent), Australia, Germany and India (10 percent), South Africa and the Caribbean (5 percent).

Wealth managers and advisors said 39 percent of their clients have property investments in the country, while 22 percent have invested in foreign property. Up to 18 percent made additional property investments in the country in 2018, with 15 percent buying outside Kenya.

Respondents said 29 percent of their clients are looking to invest in the country’s property markets in 2019/2020, while 17 percent are exploring abroad, with the likely destinations being the UK (55 percent), UAE (25 percent), US (15 percent), Australia and Canada (15 percent), Germany (10 percent), and South Africa, Spain, India, Ukraine and Ireland (5 percent).