Super-rich investors bet on Kenya amid economic gloom

Amazing great room with second-storey balcony. [File, Standard]

More than half of Kenya’s high-net-worth individuals (HNWI) foresee their portfolios increasing this year despite the prevailing gloomy economic conditions.

This is according to the latest Knight Frank’s Annual Wealth Report, which says the expected growth in their portfolio is on the back of the anticipated expansion of the country’s economy by 5.2 per cent.

Consequently, more high-net-worth individuals are repatriating their investments back to the country by investing in second or third homes.

The International Monetary Fund (IMF) forecasts that Kenya’s economy will expand by five per cent this year against the global average of 3.1 per cent.

The World Bank, for its part, projects Kenya’s economy to grow by 5.2 per cent.

The Wealth Report by Knight Frank, a real estate advisory firm, shows Kenya as the preferred location for their first homes for most of the HNWI at 33 per cent followed by Canada at 21 per cent followed by the United Kingdom at 20 per cent.

Destination of choice

Kenya is also the preferred destination for a second home at 14.5 per cent followed by South Africa and the UK respectively. The latter is also the first destination of choice for a third home followed by Kenya and Germany respectively.

“This highlights the importance of real estate in investments, and the fact that only 10 per cent of that real estate is held abroad highlights the importance of their money staying closer home,” said Knight Frank Kenya Chief Executive Mark Dunford.

The report says Canada’s reputation for quality living, the UK’s historical ties with Kenya and international appeal contribute to their consistent inclusion as top choices for home ownership.

Most of these second and third homes, said Mr Dunford, are rented out by the HNWI who purchase them for wealth appreciation, diversification, income generation and inheritance.

According to the report, 62 per cent of HNWI in the country expect their wealth to grow either significantly (10 per cent) or marginally (below 10 per cent) this year.

Boniface Abudho research analyst for Africa, Maina Mwangi Executive Director Knight Frank, and Mark Dunford CEO of Knight Frank, Kenya, officially release a Kenya Wealth report at Capital Club, Nairobi. [Jonah Onyango, Standard]

This positive outlook is a contrast to the economic conditions affecting a majority of Kenyans, who are grappling with high-interest rates, increased costs of commodities and services, and a shrinking job market.

From the report, just six per cent of HNWI anticipate their portfolios to shrink, while 13 per cent foresee that it will remain the same. Another 18 per cent expect a marginal decrease of below 10 per cent.

The report says while the pessimistic outlook represents a minority perspective, it introduces a nuanced dimension to the overall sentiment within the Kenyan HNW landscape.

The six per cent HNWI who anticipate a drop in their portfolio, said Mr Dunford, is linked to “a lot of movements” in the market, particularly related to foreign exchange as he gave an example of commercial properties, which were financed in US dollars but yield in the Kenyan shilling.

“It is, however, a very small number given where markets have been in the last 12 months,” he said.

He added that HNWI tend to take a long-term look at the economy and such surveys are key to understanding the movement of their investments in relation to the expected outlook.

“While in the short term, things are very difficult, the hope and indication is that in the medium to long term, we will begin to see a stronger recovery and continued growth. which will ultimately trickle down,” said Mr Dunford. The report says the optimism of HNWIs in their outlook is also hinged on political stability, which is viewed as conducive for investment purposes.

“The prevailing sentiments among Kenyan HNWIs reflect a sense of increased confidence in the country’s economic growth. These findings align with t recent World Bank projections indicating the Kenya’s economy is set to grow at a faster rate of 5.2 per cent,” the report says.