2 April 2014

Kenya: Nairobi Rent Hike Fastest Globally

Rent increases for high-end homes in Nairobi have outperformed top cities worldwide for the third year in a row, data from global property firm Knight Frank show.

Nairobi has back-to-back topped the list of 17 cities tracked by the index, which targets property investors and developers, since 2011. It has registered strongest growth in 2013 with 25.9 per cent, helped by demand from multinational companies setting up offices in Kenya.

Rents for top-end homes, sought after by high net-worth individuals and expatriates, increased by 17.9 per cent in 2012 and 10 per cent in 2011. Nairobi's prices rose over five times faster than the global average of 4.8 per cent last year.

"Emerging markets outperformed the world's top financial centres. Nairobi recorded the strongest rate of growth in annual terms in 2013. Prime rents rose by nearly 26 per cent in 2013 as multinationals looked to strengthen their headcount in the Kenyan capital," said Kate Everett-Allen, the firm's international residential researcher.

In 2012, Knight Frank said Nairobi's stellar performance to Kenya's economic growth and an expanding middle class, "many of whom are unable to access housing loans".

Dubai's prime rents have risen second fastest after Nairobi over the two years, but the change last year was slightly above half that of the Kenyan capital. It recorded a 13.6 per cent increase in 2013 and 14.3 per cent a year before.

However, despite the huge price increase in the two cities over the last three years, rents are still way below those of mature markets such as New York and London in absolute terms.

"Although prime rents in Nairobi and Dubai recorded the strongest rate of annual growth in 2013, rents here are half, or in Nairobi's case, as much as 70 per cent below those found in London and New York," Everett-Allen said.

"The contrasting fortunes of London and New York's financial sectors explains their differing results," she said.

New York recorded a 3.5 per cent increase last year, while London's prime rents decreased by 2.3 per cent in the same period.

South Africa's Cape Town, the only other African city featuring in the index, recorded a 0.1 per cent rise last year, which was a significant recovery from a 3.2 per cent drop in 2012.

Provisional data for Hong Kong show the city was the only other, with London, that recorded a drop in prices in 2013, decreasing by 2.3 per cent.

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