The appetite for residential real estate as investment vehicles among Kenya’s rich population is on the rise compared to preference for commercial property.
- •Kenya’s edition of Wealth Report 2024 by Knight Frank reveals that 5 per cent shy of a quarter of High Net worth Individual’s invested in home purchases during last year.
- •On the other side, when the rich were asked about the percentage of those who invested directly in commercial property during 2023, only less than 10 per cent were engaged in commercial property investments.
- •The study also noted that a key contributing factor to the subdued interest in commercial property investment is the lower yields and slow rental growth experienced in the commercial space.
“The majority of respondents identified investment as the primary motivation behind the home purchases, a strategic choice highlighting a deliberate effort among rich individuals to view residential real estate as a lifestyle asset and a robust investment vehicle,” notes Boniface Abudho, Analyst at Knight Frank.
“Factors such as legacy and inheritance planning, wealth appreciation, diversification of investments, income generation motivates the rich into investing into the residential real estate,” he notes.
The shift in working patterns, driven by the global embrace of hybrid and flexible work arrangements, has played a pivotal role in curbing the appetite for commercial spaces. The change in the office landscape has likely influenced high net worth individuals (HNWIs) to reevaluate the attractiveness of commercial real estate as a viable investment avenue.
Over the past few years, the office real estate sector has grappled with an oversupply situation, leading to stagnating rental growth. The diminished potential for lucrative returns may have deterred HNWIs from allocating a significant portion of their investment portfolios to commercial properties.
“The cost of materials, labour, and engineering for commercial projects tends to surpass that of residential projects. This financial barrier may deter HNWIs and their clients, especially in an environment where obtaining financing has become more expensive,” Knight Frank notes in the study.
Top Choices for New Home Purchases
Kenya emerged as the first choice for new residential home purchase, capturing 33 per cent of respondents’ preferences. Canada followed closely at 21 per cent, positioning itself as the second most favoured destination. The UK secured the third spot with a 20 per cent preference rate.
Kenya also topped the second choice for residential home purchase among the rich, sharing the leading position with South Africa and the United Kingdom, garnering 14.5 per cent of respondents preferences for a second home purchase.
The UK claimed the top spot as the preferred destination for a third home purchase, commanding a 25 per cent preference. Kenya also maintained a strong presence in the third option, securing the second position with a 16 per cent preference rate. Germany emerged as a distant third choice, capturing 8 per cent of respondents’ preferences.
“The remarkable choice of Kenya across all three options underscores its significance as the preferred location for new home purchases among Kenyan HNWIs. This trend reflects a renewed confidence in the country’s economic, social, and political landscape.”
The survey indicates a notable upswing in perception among affluent residents, suggesting an overall trend where Kenyans display increased interest and trust in their home country.
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