12 March 2014

Kenya: Nairobi's High-End Housing Price Lags

Luxury house prices in Nairobi increased by 4.9 per cent in 2013, less than half of the double-digit rise in the previous year, according to latest data from Knight Frank.

The city had recorded a 10 per cent price increase in 2012, which placed it eleventh out of 80 global cities surveyed in the property consultancy's Prime International Residential Survey.

It has subsequently slipped 20 positions to 31st out of 85 cities polled in the latest survey contained in The Wealth Report 2014. Prices have slowed for two consecutive years after Nairobi displayed a "startling" price change in 2011 which placed it first in the report.

Top cities worldwide are in "full rebound mode" as regions such as the Eurozone gradually recover from financial crisis, which has possibly removed shine from Kenya's capital that served as one of the few "safe havens" in 2011 for ultra-high net worth individuals.

Other global cities such as Madrid, Dublin and Munich have recorded surges in luxury house prices in a change of fortunes.

"This is partly being led by safe haven flows from investors in less secure Eurozone countries looking to insure against the still real possibility of a collapse in the euro," the firm's international residential researcher Kate Everett-Allen says in the new report.

Sporadic terror attacks across Kenya in the past three years have also served to keep off foreign property investors and has a resulted in rising rental prices as tenants - mostly expatriates - out-price each other for most secure locations. The attacks have had an inverse effect as few potential foreign buyers if any are willing to risk investment.

London-based head of global residential at Knight Frank Andrew Hay recently told Bloomberg TV India that Nairobi's high-end property market was suitable for high net worth shoopers with huge risk appetites.

"I think if you wanted to be risky, I would take you to Nairobi in Kenya," Hay said in the interview.

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 - usually 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," Everett-Allen stated in the Prime Global Rental Index quarter three 2013.

Top-end rents in Nairobi increased by 17 per cent in the six months to end of last September, but slowed to 2.3 per cent in the latter three months of the period.

Expatriates have a liking for rental houses in affluent suburbs such as Westlands, Kitisuru, Gigiri, Muthaiga, Runda, Roselyn, Lavington 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.

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