19 February 2014

Kenya: Nairobi's Niche Real Estate Seen Ideal for High-Net Individuals

High net worth individuals seeking "risky" property investments with potential for huge returns would be better off venturing into Nairobi, an official of London-based Knight Frank has said.

Andrew Hay, head of global residential at the firm, told Bloomberg TV India in an interview last week that he would take willing HNWIs seeking high-risk property investments to shop in Nairobi.

"I think if you wanted to be risky, I would take you to Nairobi in Kenya," Hay said, adding that he would take shoppers looking for "quick growth" to Dubai in the UAE, while conservative ones seeking "prolonged, well-performing investment" would be taken to London or New York.

He said Hong Kong and Singapore - both in Asia - are quite expensive to invest in at the moment "because of the cooling measures". It is however an "exciting time" to venture into Sydney, Australia, he said.

Hay ranks Jakarta in Indonesia as another high risk property market. Jakarta and Nairobi have been ranking top among global cities in terms of house price growth over the past few years.

In its latest global rental index, the consultancy said Nairobi topped the annual rankings for the second consecutive quarter with 25.8 per cent increase in high-end house rents in the 12 months to end of September.

The increase in rents, it said, was due to "a scramble" for secure high-end rental houses in Nairobi's affluent suburbs - most sought after by expatriates - amid increased terrorism threats.

"Recent security concerns (in Nairobi) mean demand for secure accommodation - be it apartments or gated compounds - is strong and supply is limited," the firm's international residential researcher Kate Everett-Allen stated in the Prime Global Rental Index for the third quarter 2013.

The high rents make Nairobi a hotspot for HNWIs seeking lucrative returns, but portends a huge risk due to the rising security threats. Expatriates usually take up rental houses in upmarket suburbs such as Westlands, Kitisuru, Gigiri, Muthaiga, Runda, Roselyn and Karen.

As of April 2013, a four-bedroom apartment in these locations was let at between Sh250,000 and Sh320,000.

Knight Frank observes that Nairobi and Dubai are among few emerging markets which have been exceptions over the past few years, with prime residential rents rising while other key cities worldwide recorded only weak growth up until 2012.

Top-end rents in Nairobi increased by 17 per cent in the six months to end of September and 2.3 per cent in the three months to end of September.

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