Kenyaâ€™s super-rich gain from developersâ€™ loss
SEE ALSO :Coca-Cola sells head office in NairobiWhile they mulled over collecting “items of passion” such as vintage cars and wines, watches and wall paintings, their investments were solidly grounded in the top layer of the real estate sector. The slowdown in the real estate market last year owing to an oversupply in the middle and upper segments drove the super-rich into property investments. “Kenya’s super-rich are buying more luxury homes in the country, signalling bargain-hunting as prices for trophy houses soften. I am sure they believe the prices will not stagnate or drop forever,” said Shirley on the sidelines of the launch. According to the Wealth Report, Nairobi’s ranking on the Prime International Residential Index (PIRI) dropped from 75 to 92, with prices softening by 4.5 per cent. Despite the price drop last year, luxury property values in Nairobi have appreciated by 38 per cent since 2010. Lee Karuri, a developer and chairman of Resorts and Cities, says the poor financial regime within the real estate sector has boosted the fortunes of the high-net-worth-individuals. He says low property prices are mainly due to low liquidity within the sector as banks invest in treasury bonds. This, he adds, coupled with an economy that has performed below par, means there was little money for onward lending to real estate. But for the rich, usually cash buyers, this scenario presented an opportunity. On the other hand, developers had to deliver higher specifications for such homes at lower prices. But that is not entirely a bad thing for local developers who have a mix of properties, including the high-end segment. For example, Cytonn has over the last couple of years set sights on Karen, one of the country’s premier real estate investment destinations. Here, the company has put up elegant homes with corresponding prices to boot. Take the case of the firm’s Situ Village, a development nestled between Mbagathi and Ololua ridges. In keeping up with the area’s exclusivity, the gated community has not only incorporated jogging paths to keep residents healthy but also riding ways. Karen is synonymous with well-bred horses and adding such riding infrastructure will no doubt appeal to the super-rich who will have no qualms paying Sh80 million for a villa here. For the super-rich, however, that is a drop in the ocean considering that the company’s Applewood project, also in Karen, is selling for Sh170 million for a villa. “We do our research very well, hence we do not participate in locations with dwindling returns,” Cytonn’s Edwin Dande told Home & Away. “Such real estate in Kenya has very attractive returns of up to 20 per cent for development returns and 15 per cent for existing properties. This makes it attractive for wealthy individuals looking for a home, especially if they want stable and predictable returns.” To this group, any fall in luxury home prices presents low hanging fruits, fruits that are out reach for other prospective home owners. In fact, this group’s wealth does not include their primary homes that are palatial in their own rights. This year, Wealth Report added what it called an Attitudes Survey to document current and future investment plans for this group. For the Kenyan lot, investing in homes outside the country is the next big thing. And to prove that money is not an issue here, 65 per cent of Kenya’s super-rich looking for a home outside the country consider buying homes in the United Kingdom and 35 per cent in Canada. Other countries on the radar of Kenyans include United States, United Arab Emirates and Australia. So, is Kenya’s real estate dead as some have argued? Well, not to the super-rich who will snap whatever they fancy with their millions.
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