Nairobi, Mombasa Luxury Real Estate are Global No. 1
When thinking about luxury real estate in a global context, there are few markets in the developing world that come to mind. However, two cities in East Africa made headlines late last week when KnightFrank released their Prime International Residential Index (PIRI), which has provided a unique gauge for price flux across the world’s luxury property markets over the last 6 years.
Nairobi and property around the coastal town of Mombasa not only made the list of fastest growing luxury real estate markets. They topped it, beating out cities like Miami, Cape Town, Bali and Vancouver. This had to raise some eye brows around the world. It certainly got my attention.
I knew the Nairobi and Mombasa real estate markets were hot, but I had no idea how well they were doing in comparison to other traditionally strong markets.
So, how did these Kenyan cities top the list? Here’s what the report provided as likely reasons for this growth… They called Kenya a safe haven. Yes, a ‘Safe Haven’. Historically, this has been true since Kenya has been surrounded by countries in conflict over the years. I remember going to school in Nairobi and often meeting children of very wealthy Ethiopians, Rwandans, Sudanese and Ugandans. In fact, I remember hearing about a former respected Tanzanian President saying and I’m paraphrasing, “Why send your kids to school in London, when Kenya is right here”.
They also cite Kenya’s rapid economic development as attracting domestic and international private equity, with emphasis on remittances flowing from Kenya’s increasingly affluent Diaspora. In fact this group is responsible for more Foreign Direct Investment (FDI), then any other source including the traditional development institutions like the World Bank and IMF. I personally know of groups of individuals teaming up to get mortgages on land and homes, only to flip them and receive significantly high returns on their investment. There is also more access to capital marketed directly to the Diaspora by banks such as Equity and Chase banks.
The recent discovery of oil in one of Kenya’s poorest regions – Turkana, is likely to spur more speculative investment. Two neighboring countries also recently discovered oil, that make up the bulk of the East African Community (EAC). This economic block also has plans for a single currency. If the ‘Oil Curse’ does not manifest itself in this region, the chances are high, that the EAC could also find itself host to one of the fastest growing middle classes in the world. One to watch!
Real Estate continues to be the biggest wealth builder in the world. Africa, often considered the last frontier, is at the cusp of a rapid development phase, aided by new technologies. I predict that as leaders learn lessons from the Arab Spring, and infrastructure is improved and security is less of an issue, there will be several African cities on this list next year.