Luxury homes in Kenya hit by expatriates’ budget caps

NAIROBI: Luxury residential rents slowed down in the last three months following budgetary limits imposed on expatriate staff of foreign missions, non-profit organisations and multinational companies, according to a report. The report also attributed the slow-down to continued terrorism threats and sporadic attacks.

According to the Knight Frank Prime Global Rental Index (PGRI), a quarterly report, Nairobi city experienced no movement in high-end rents between December 2014 and March 2015. However, a 0.7 per cent increase was recorded half-yearly and annually for the period between March 2014 and March 2015.

Knight Frank Kenya Managing Director, Ben Woodhams, said: “Expatriates have housing budgets, beyond which they must seek approval from their head offices for extra rental expenditure.” The report notes that expatriate staff make up a large portion of high-end residential tenants in Nairobi.

Mr Woodhams noted that the slowdown was anticipated from as early as the beginning of 2014, with the city’s luxury residential market coming to a demand-supply equilibrium that was bound to tilt in favour of existing and prospective tenants. For some-time, there has been a higher demand for high-end houses-more than the market has been able to supply. But now with the equilibrium, tenants have more options.

The report also noted that the Kenyan real estate market remained generally depressed due to continued terrorism threats and sporadic attacks. As a result, some home builders have opted to rent new units originally intended for outright sale in order to generate cash flows to service project financing. This move has added to the rental pool, further impacting on supply and demand.

Nairobi has not come under any terrorist attack in recent times. However, parts of northern Kenya have witnessed spates of terror-related attacks with the latest one being an attack on quarry workers in Mandera County that left more than 14 people dead.

SOUGHT-AFTER POCKETS

Last month, another report by Knight Frank stated that between the months of December 2014 and March 2015, the volume of transactions in luxury houses dipped due to insecurity.

Woodhams was then quoted saying: “There is a slowdown in some pockets of the high-end market. This is a market whose mainstay is the expatriate community, who are now having to change the way they live and properties they occupy due to security concerns.”

He noted that some investors had opted for alternative forms of investments such as government securities.

The current report, however noted some resilience in ‘sought-after pockets of the market’ with some even recording rental growth as incoming tenants compete for the few units that fall vacant.

Knight Frank Kenya Head of Agency, Anthony Havelock, said: “We have waiting lists for some of the properties in our residential portfolio. We have seen demand growing for large, duplex houses as they are perceived as being more secure than stand-alone homes due to their location in gated compounds.”