Kenya’s luxury real estate saw the greatest price increase globally in 2011, according to Knight Frank’s Prime International Residential Index (PIRI), which monitors price changes across the world’s top-end property markets.
Price growth in both Kenya’s capital Nairobi and the country’s Indian Ocean coastal hot spots was more than any of the other global locations included in the Index, with the value of Nairobi’s prime real estate growing by 25% in 2011 and the Kenyan coast by 20%.
Knight Frank defines “prime property” as a location’s most desirable and usually most expensive real estate.
Kenyan luxury real estate prices grew faster than major cities such as Miami (19.1%), London (12.1%), Moscow (9.8%), New York (3.1%), Shanghai (-3.4%) and Singapore (-4.7%).
It should, however, be noted that Kenya’s growth comes from a base of relatively low luxury property prices. The average price per square metre of prime real estate in Nairobi is only US$1,700, which doesn’t even compare with cities such as Monaco ($58,300/sq m), London ($48,900/sq m), Beijing ($17,400/sq m) or Mumbai ($11,400/sq m).
Increasingly affluent buyers from emerging markets are boosting residential property prices in developed world locations such as Miami, London and Vancouver. “When asked which nationalities will become most important as prime property buyers over the next five years, Chinese, Russian, Middle Eastern, Latin American and those from other growth economies consistently top advisors’ lists,” notes Liam Bailey, head of residential research at Knight Frank.
The reason for this is that many of the newly rich in the developing world fear that issues such as corruption and politics can pose a risk to property investments in their home countries. They therefore prefer safe haven locations such as London, which has a cosmopolitan environment, good education and both personal and property security.
Bailey says that New Zealand’s isolation from the world’s conflict zones makes it possibly the ultimate safe haven destination for the world’s super-rich.
Although ‘safe haven’ isn’t necessarily a phrase many people would use to describe Kenya in a global context, compared to its neighbouring countries it is just that, commented Ben Woodhams, managing director of Knight Frank Kenya.
Woodhams added that Kenya’s fast economic development is attracting domestic and international private equity. However, recent events such as the kidnapping of tourists staying on Kenya’s north coast and a steep rise in interest rates to almost 25% also highlight the potential vulnerability of some emerging prime markets.
Saskia Sassen, co-chair of the Committee of Global Thought at Columbia University and the person who coined the term ‘global city’, said that Nairobi is becoming “increasingly important in a rapidly urbanising world”.