Kenya’s super rich still consider land and property as their main investment vehicles over other asset classes, a new report shows.
The survey by Standard Chartered Bank also found that wealthy Kenyans prefer establishing or funding their own business instead of investing in other people’s businesses.
The survey, which tracks investment plans of peoples whose cash under management are above Sh100 million, says that 28 percent of those surveyed prefer land while 27 percent go for property.
The choice of investments leaning towards the property market comes as Kenya’s real estate sector experiences sluggish growth in sales and rental prices due to a huge stock of unsold units.
“Kenyan wealth creators are more driven to start or fund a business than individuals in any other market in the study, with more than a quarter (27 percent) citing this as one of their top three financial goals,” says the Wealth Expectancy Report 2019 released this week.
This shows that rich people would rather put investment in their own firms than buy equity in other people’s firms or shares listed on the Nairobi Securities Exchange (NSE).
Shares prices of NSE-listed firms have been bearish in recent years, and only started rising from the third quarter of this year. A recent study by realtor HassConsult showed that returns from land over the past decade had outpaced other asset classes like government bonds and equities. “Funding their children’s education, buying land, establishing or funding their own business and investing in property are the most common aims,” the study notes.
The sluggish prices in the property market over the last year have not dampened the wealthy Kenyans’ appetite for investing in property.
However, according to experts, real estate prices have been less volatile compared to other investments. They have also been useful as a hedge against inflation.
“Real estate provided the highest returns as evidenced by the property boom. This includes construction and speculative buying of land,” said University of Nairobi economist Peter Muriu. The scramble for investors to cash in on land prices has pushed up prices in Kenya to one of the highest in Africa.
The Hass index, for instance, shows land prices within the city have increased 638 percent since 2017 while the city’s satellite towns in Kiambu and Kajiado have witnessed a 894 percent price jump over the same period. “The index, which compares Nairobi’s land price movements to other asset classes and commodities, found that the city’s land had outperformed all other asset classes in return on investment,” said HassConsult.
The property boom has also been driven by Kenya’s growing middle class who cannot afford property in the capital, HassConsult says.
A September 2019 report said that about 356 billionaires were living in Kenya last year, placing the country at number four in a ranking of top African cities based on super wealthy persons.
The Africa Wealth report for 2019 report published this month by Mauritius based AfrAsia Bank ranked South Africa top with 2,169 billionaires, Egypt (932) and Nigeria (531). These individuals have net assets above $10 million (Sh1 billion).
The report said total wealth held by Kenyans increased 64 percent over the past decade, but reckons that the riches took a knock last year following the loss of nearly a fifth of the market value of the Nairobi Securities Exchange (NSE).
The Standard Chartered Wealth Expectancy Report 2019 says it is based on a blend of opinion research into the financial situation and behaviours of 10,000 wealth creators across China, Hong Kong, India, Kenya, Malaysia, Pakistan, Singapore, South Korea, Taiwan and the UAE.