Wealthy Kenyan investors plan to put a bigger proportion of their wealth in real estate this year compared to equities, which continue to rank low on their investment portfolios.
The 2023 Wealth Report by realtor Knight Frank published this past week shows that in 2022, investments in commercial property comprised up to 40 percent of rich Kenyans’ portfolios while stocks only accounted for 18 percent.
This year, more than 60 percent of the Kenyans worth at least $1 million (KSh128 million) plan to invest in private rental property, even as the domestic stock market suffers investor apathy as stockholders move to the more attractive government securities.
Bonds, which constituted 26 percent of rich Kenyans’ investments last year, continue pulling investors off the stock market with their better returns compared to equities, which have been impacted by companies’ reduced profits occasioned by last year’s macroeconomic shocks.
Foreigners, who dominate trading on the Nairobi bourse, have also been fleeing the market citing Kenyan Shilling depreciation and dollar shortage.
The property sector, however, continues to blossom, buoyed by clear bias for property ownership by high-net-worth Kenyans, coupled with their increased preference to invest locally.
According to the wealth report, the proportion of property overseas owned by wealthy Kenyans decreased from 19 percent in January 2022 to 11 percent this year, pointing to increasing appetite for real estate in the country.
Mark Dunford, Knight Frank’s Kenya chief executive, told The EastAfrican that foreigners who have invested in the country’s property market aren’t fleeing back to their countries as much as they are from the local bourse.
“In fact, we’re seeing more international institutional investors showing interest in Kenyan real estate. Traditionally, the challenge has been the lack of scale in Kenya and Africa. But now there’s a vast market for wide-scale investment,” Dunford said.
Real estate is proving to be a reliable hedge against inflation, currency depreciation and other economic risks for African investors, which explains the rising appetite at the expense of the stock markets.
Based on the report, the wealth of high-net-worth Kenyans and Africans dropped by only five percent last year, while the fortunes of the rest of the globe’s wealthy people dropped by 10 percent as food and energy shocks shook the world.
Knight Frank’s global head of research Liam Bailey explained that this is mostly because of the difference in the composition of the wealth portfolios where other wealthy individuals elsewhere across the globe put most of their money in equities.
“With the wealthy in Kenya and Africa less exposed to overseas property holdings and equity markets than high net-worth individuals globally, their assets proved more resilient to the global disruption,” Bailey said.
Kenya’s planned rollout of affordable housing could boost indirect investment in property through real estate investment trusts (Reits), which are now poised for increased uptake through the recently launched Kenya National Reits.
In 2022, indirect investment in real estate through Reits in Kenya constituted only four percent of wealthy individuals’ portfolios. However, this is likely to rise this year, alongside direct investments in commercial property.
By the end of the year, half of the wealthy Kenyans are optimistic that their wealth will have increased by more than 10 percent but will shift in favour of property investments as multiple risks continue to batter the stock market.
