Who is buying what in the property business?

By Jacob Ng’etich

In January 2011, during the ‘dry month’ in the property business, Simon Njogu, a land broker in Ruai, received an unusual customer who changed his world.

A previous customer in Ruai town had recommended Njogu’s name to the client — who he says is a foreigner — who was looking for land in the area. The broker explained to him the different portions of land that were on offer and the man immediately declared interest.

“He told me he was interested in two acres and wanted to see it. After seeing it, he got interested and asked how much it would cost through his translator,” said Njogu.

Not sure how much to charge, and having listened to previous stories of how foreigners do not hesitate when buying land, Njogu threw a wild figure. “We were selling that land for Sh2 million but given the interest that the buyer had exhibited, I told him that I wanted Sh15 million. Without wasting time, he said Sh12 million was okay with him,” says Njogu.

Cash payment

“He paid the cash equivalent of Sh10 million in dollars and the rest in Kenyan shillings the following day,” added Njogu.

A week later, the buyer started building two bungalows simultaneously, which now stand shyly in the stone walled compound in the piece of land.

He is among the thousands of moneyed foreigners acquiring land in the country, who some blame for pushing up property prices.

Others, however, attribute this simply to supply and demand factors. According to Collins Kowuor, the chairman of the Institution of Surveyors of Kenya, the prices of property in the country have indeed gone up by a big margin.

He says the heavy development in the middle class areas of Kileleshwa, Kilimani, Kitisuru, Runda, Thigiri, Ridgeways and Loresho and even Lavington where developers are busy building apartments as well as ultramodern office blocks and shopping malls, have pushed up prices high as investors compete to get space.

“We are experiencing a boom that is buoyed by the demand, and the infrastructure development continue to provoke more investment in the market,” says Kowour.

Daniel Ojijo, the executive chairman of Mentor Holdings, agrees that prices of property have gone up significantly over a period of time, but dispelled the notion that it was foreigners triggering the high prices. “90 per cent of those buying property in the country’s market are hard working Kenyans, while about five per cent could possibly be people from out of the country,” explains Ojijo.

He adds: “The prices might still continue rising because of the vibrant market, and also if the major factors affecting sales, including the cost of building materials, are not looked into.”

Kowour agrees that although prices have shot up threefold since 2003, there are still enough people willing to buy. According to property dealers, the rush for property has pushed prices high with particular parts of cities in Nairobi, Mombasa, with beach plots going for even higher.

The latest Knight Frank’s Global Development Review High-Net-Worth recently indicated that individuals from the UK, Italy and the United Arab Emirates were the top three foreign buyers s of luxury residential properties in Nairobi and Mombasa.

The report also forecasts that buyers from China and the US will most likely be the source of future demand for luxury residential properties in Nairobi. The Wealth Report 2013, released by Knight Frank, showed prime residential house prices were up by ten per cent in Nairobi last year, the eleventh highest increase among more than 80 cities surveyed.

Growth

The city is among top locations expecting a rise in the level of luxury development volumes, financing and purchaser activity. Dubai, Miami, Nairobi and London are key cities that are increasingly being considered as investment hubs for high net worth investors in their wider regions, the review states. 

In 2011, in the Global Review, Nairobi and Mombasa were voted the world’s most promising investment hubs for property developers following massive returns from rentals and sales registered in 2011.

According to the Global Perspective on Prime Property and Wealth, the market prices in the luxury neighbourhood and housing developments of the two cities rose by 25 and 20 per cent respectively last year to lead the pack, according to the study, titled Wealth Report 2012.

The global report noted that the startling performance at the top-end of Kenya’s housing market is particularly interesting.

Price growth in both Kenya’s capital city and Indian Ocean hot spots outstripped all other 71 Prime International Residential Index locations to take the first and second positions respectively surveyed globally.

Report

The report noted that Nairobi and Mombasa were the only cities in the developing countries that recorded massive property price increases.

According to Ojijo, the facts of the rise in the value are not surprising and the future looks better.

“The Kenyan capital is a very strategic town in the entire continent and in the world as far as logistics are concerned. This easily attracts investors with property interests from across the world,” explains Ojijo.

According to the report, despite the increase in the cost of luxury property, buying a metre of land in Nairobi and Mombasa is still cheaper than in other cities such as Monaco, and this encourages foreign investors to venture into the country.

Miami was third at 19.1 per cent, Bali (15 per cent), Jakarta (14.3 per cent), London (12.1 per cent), Vancouver (10.4 per cent), Moscow (9.8 per cent), Toronto (8.5 per cent), and Beijing (8.1 per cent).

“Kenya is emerging as the choice of investors headed to Africa and this comes with the need to have luxury residential housing for the high net worth group,” says Kowour.