INSIDE VIEW KENYA 2018 - Knight Frank
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INSIDE VIEW KENYA 2018
Overview
Kenya Market Overview
Kenya’s unique combination close to Mount Kenya, and within New construction of prime
of its beach and safari private game conservancies. residential properties is continuing
circuit are the pillars of apace in Nairobi and the
the country’s huge tourist Nairobi is a different residential
abundance of supply ensures
industry, with around 1.5 market altogether. As a fast- availability for those seeking
million people flocking to growing melting pot and major bargains. However, affordability
its 19 game reserves and regional hub with a strong remains an issue for the local
the 1,400-kilometre Indian economy, Nairobi attracts market, with much of the new
Ocean coastline every year. international corporations looking to stock beyond the means of most
set up their headquarters in Africa. people. The biggest issue is
The tourist season is also one of
The biggest employers are those in access to credit. In a country of
the longest anywhere at 40 weeks
the FMCG (fast moving consumer 48 million people, less than 30,000
a year, with no typhoon season
goods) sector who are tapping have mortgages.
or extreme weather conditions to
into new wealth and spotting the
trouble it—only the rainy season Interest rates are currently capped
country’s massive growth potential.
around Easter. At other times at 14.5%—as they would usually
during the year, the trade winds The city’s hotel industry is growing be closer to 16%—in a political
that once powered commerce fast, as is the technology industry, move to free up mortgages, but
between Africa and India fuel which attracts many young the cap slashes the margins for
a booming kitesurfing industry Americans straight out of college banks. Lenders are tending to
on the powder-white beaches. who want to embrace exposure put their money into government
Among them is Diani, which has to this rapidly expanding market. bonds rather than get involved
just been voted one of the best While many expatriates will live in in the private mortgage market.
beaches in Africa by TripAdvisor. high-end residential areas such as Many overseas investors will
Its popularity is on the rise again Karen, Runda or Muthaiga, these buy with cash or get dollar-
too, with occupancy rates in its young tech workers tend to rent denominated mortgages at
beachfront resorts having doubled apartments closer to work and far better rates, but the lack of
since 2015. A new bypass road enjoy Nairobi’s burgeoning youth liquidity in the Kenyan property
under construction will also culture in the form of trendy bars market is a major obstacle.
provide a direct link to the south and clubs.
coast from the western side of There is optimism that the market
Mombasa city. The Kenyan capital is also on will pick up in 2018, however.
the radar of many high net worth Nairobi is a key regional centre
Kenya’s second home market investors, as seen in the Knight that offers good prospects for
is largely internal, with demand Frank Wealth Report 2017. Among investors, and Kenya’s relations
mainly from wealthy Nairobi the global HNW population, 4% with its neighbouring countries has
families seeking a beachfront look to own homes in Kenya—led never been better. On the coast
holiday home. Whilst house and by the UK’s HNW population, 63% and in the bush, buyers will be
apartment sales are typical, it is of whom express interest in Kenyan drawn by their hearts as much as
increasingly common for buyers property, followed by 16% of their heads—and as history has
to invest in a beachfront plot and South African HNWIs and 11% of shown, little will stop them.
build a holiday home.
Spanish, Mauritian and US HNWIs.
Overseas interest in Kenyan About 5% of the super-rich in
holiday homes comes mainly Uganda, Tanzania, Nigeria, Ghana,
from British buyers, but we also Switzerland, France, Canada and Ben Woodhams
see a sizeable number of Italians Lebanon are also likely to invest in Managing Director
and other nationalities drawn homes in Kenya. The country as a
to the coast around Malindi, whole is among the top five most
Watamu and Lamu, as well as the popular second home locations for
For Sale – Diani Beach, Kenya countryside such as in Nanyuki Africa’s wealthiest.
02 Knight Frank Inside View Knight Frank Inside View 03
Lifestyle
Deerpark Karen
From conventional expansive estates to
contemporary villas with all the trimmings – what is
driving this growing trend and how are developers
adapting to, and staying ahead of these changing
behaviours and perspectives?
By Zoe Dare Hall
The number of Kenya’s high net Customarily, this type of buyer
worth individuals has doubled to would have seen the ultimate trophy
around 9,400 over the last decade. property as a prodigious home Pool deck
The country is now home to the set on sprawling acres of land,
fourth highest number of dollar alongside a private security team architect Johann de Wet, managing that is driving Karen’s expansion as pool is the entertainment wing in a security and electronic chip and pin
millionaires in Africa and property is and an army of staff to maintain it. partner at Boogertman + Partners it becomes an increasingly popular separate building, which includes a access in every house.
a priority when it comes to ways of Currently, Kenyan buying behaviour Architects Kenya, whose projects lifestyle location of choice. steam room. “This is not typical of
include East Africa’s biggest homes in gated communities, but In keeping with its green
investing their wealth. has shifted and there is a growing Karen boasts many of the city’s surroundings, the development
shopping mall, the new Two from my experience, communal
preference for high-end villas on international schools, renowned is also ahead of the curve
Where traditionally wealthy Kenyans Rivers in Nairobi, and Nelson facilities in developments are rarely
smaller parcels of land within gated restaurants, a growing number of sustainability-wise. “With the
might have sought a safe haven for Mandela’s family house in Maputo, used as they don’t provide home-
communities that are designed and best-in-class shopping malls and the
their cash in luxury property in South Mozambique. owners with the privacy to entertain increased pressure on energy and
built to world-class standards. Karen Golf & Country Club. On its
Africa, Dubai, New York or London, their guests. We have prioritised water around the world, it is our
De Wet is also the architect behind doorstep is the Ngong Forest – one
they are increasingly seeking high- “Few want the costs of owning large the need for each home-owner’s responsibility to ensure we develop
a new, gated community that he of the few remaining natural forests
end products within Kenya itself. tracts of land in an urban setting any privacy in this model,” comments sustainable environments,” says De
says will redefine luxury living in in a capital city – and the Oloolua
Their current focus is on locations more. They want the ability to lock De Wet. Wet. “Deerpark is playing its role by
Nairobi. Deerpark Karen is a new Forest, whose trails provide an oasis
that offer the best education for up and go, and the reassurance of for residents seeking respite from the going beyond the statutory need
development of 10 villas, priced The spaces within are large, open-
their children, personal security, an shared security, back-up water and from US$1.11m (Kshs115m) hectic city centre. for energy and water conservation
attractive lifestyle and the greatest electricity. Such is the mobility of plan and flooded with light – the measures. There is solar water
due for completion in March
opportunities for capital appreciation. the modern urbanite,” comments It’s in this setting, and with this result of what De Wet describes heating with an added ‘green’
2018, in the sought-after Miotoni
wealthy, well-travelled demographic as “the very restrained use of heating feature that uses air to heat
neighbourhood of Karen.
of prospective buyers in mind, that materials”. The large windows and water as a back-up for overcast
The affluent suburb – named De Wet has designed Deerpark sliding doors allow the sunlight days, and waste water is treated
after Karen Blixen, the Danish Karen’s villas to reflect what Nairobi’s and breeze to permeate the rooms and re-used for gardening.”
author of the colonial memoir wealthy residents now expect. and provide a connection with the
Out of Africa, whose farm once mature woodland that surrounds By bringing something new to the
In a striking departure from the
stood on this land – is a magnet Deerpark Karen. Rather than a market that appeals to high net
‘country’ aesthetic that dominates
for British and European expats classic pitched roof, De Wet has worth domestic and international
high-end homes in the area – large
when they relocate to Nairobi. This opted for flat roofs “to provide buyers, Deerpark Karen is proving to
houses with pitched roofs, more
is no transient population though; better use of internal spaces, be an exceptional development, with
redolent of well-heeled English
many stay for generations. Karen including roof space for storage”. 60% of its villas having sold in less
country homes – he has gone for
has a peaceful, suburban feel than eight months since its launch.
contemporary, angular European- The sense of luxury begins on
combined with the benefit of an
style homes that offer the rare luxury They call Nairobi the ‘Green City
easy commute into the Central entering Deerpark Karen via a
of their own private leisure facilities. in the Sun’, and Deerpark Karen
Business District, and to Jomo drive-through Porte Cochere and
Kenyatta International Airport, Each home is set on half an acre of the houses feature technology makes the most of its natural assets
via the Southern bypass – one of private land with multiple courtyards, that is rare in Nairobi’s gated to bring a level of luxury the Kenyan
various infrastructural upgrades a garden, pool and gym. Next to the developments, including CCTV capital has not seen before.
Private gym
04 Knight Frank Inside View Knight Frank Inside View 05
Research
Proposed Sub-Centres Under Nairobi’s Master Plan
Ruiru
Market resilience continues Runda Ruaka
Githurai
Following a period of unprecedented growth from 2010 to 2012 when annual price growth Kasarani
exceeded 30% per annum, Nairobi’s prime residential market has witnessed a price correction
in recent years. We see this an indicator of a maturing market as vendors adjust their price
expectations. We expect the prime market to recover in the first half of 2018 as the current wave Kabete
Dandora
Uthiru
of political uncertainty draws to a close, ending the period of moderate price growth, evident Rual
throughout 2016 and 2017. CBD
Dagoretti
By Charles Macharia Woodley
Makadara
Karen
KEY
Imara Daima
Rentals the residential market is reaching its respectively as of mid-November Airport North
Prime residential rents in Nairobi cyclical trough. 2017. However, it strengthened Langata
URBAN CORE
declined during the first half of 2017 against the Japanese Yen by 6.4%
Sales SUB CENTRE (JCT.)
albeit at a slower rate of -2.8% over the same period. Within the Shokimau
SUB CENTRE (STA.)
compared to -3.2% during the first Prime residential prices increased East African Community, the Kenyan
Shilling had depreciated against the NATIONAL HIGHWAY
half of 2016. An oversupply of prime by 0.9% over the first nine months
Ugandan Shilling, Tanzanian Shilling NEW BYPASS ROAD
properties for rent is behind the of 2017 compared to a decrease of
and Rwandese Franc by 1.9%, 0.9% MAIN ROAD
weaker prime rental growth, which 1.0% over the same period in 2016.
and 1.4% respectively as of mid- RAILWAY
has given tenants more leverage The prevailing market conditions,
coupled with the already high November 2017.
to negotiate with landlords. In a
market dominated by expatriate capital values of prime residential Taking account of currency Nairobi City Master Plan
tenants, corporate budget cuts homes, have however resulted in low movements only, a European buyer
by multinational firms have further transaction volumes. purchasing a Kshs100 million, an expanding middle class, and The tallest tower in the scheme will of the capital. The investment will
influenced the performance of this Furthermore, the introduction of property would have saved 8.2% on positive demographics such as stand at 178 metres (43 storeys). be the company’s third phase of the
high-end residential market segment. interest rate capping during the the price (or €75,000 in real terms) high population growth at 2.6% per
Chinese property developer Great Wall Gardens development,
second half of 2016 led to most compared to two years earlier, whilst annum against a Sub-Saharan Africa which will see the construction of
While there has been much talk in Erdemann Property is also building
a US buyer would have realised a average of 2.3%.
financial institutions being reluctant a US$60 million residential housing 2,000 units comprising two-bedroom
the market about a dramatic decline saving of 1.4% (or US$14,000) over
to lend to private individuals. Lenders The positive outlook has led to project in Athi River on the outskirts and three-bedroom apartments.
in residential rents, we sense that the same period.
have since shifted their focus to increased investment from major
corporate borrowers and investing in foreign firms, in particular from China,
Purchasing a Kshs100m home: government bonds. This trend has Outlook with their focus being in and around GDP GROWTH: KENYA VS SSA REMITTANCE INFLOWS USD MILLIONS
Potential savings for a European and continued into the second half of Our outlook for Kenya remains positive the country’s capital. Examples KENYA’S GDP SUB SAHARAN AFRICA
6.5
US buyers Nov 2015 Vs Nov 2017 2017 as potential sellers and buyers include a US$70 million investment 1,724
in 2018. Government regulations, 6.0
2016
hold off key investment decisions by Chinese investors, China National 5.5 1,548
infrastructure spending (to meet 5.0 1,428 2015
DOLLARS until the election is concluded. the country’s Vision 2030 goals), Aero-Technology International 4.5
1,290 2014
4.0
combined with a growing realisation Engineering Corporation (AVIC), as 3.5 1,170 2013
However, despite the slowdown in well as the acquisition of a 38.9% 3.0
2012
activity, we believe transactional amongst developers that there is a 2.5
need to phase project launches in line stake in the Two Rivers development 2.0 xxx
activity will gain momentum in 2018 by Jiangxi Water and Hydropower 1.5
2012
as the market stabilises. with demand, leads us to believe the 2013 2014 2015 2016 2017**
$ 979,000 $ 965,000 real estate market has become more Construction Company—which will
Central Bank of Kenya Central Bank of Kenya
NOV 2015 NOV 2017 Nairobi and Mombasa continue to mature and resilient. consist of five-star hotels, office **Provisional
attract interest from both local and blocks, residential homes and
1.4% Cheaper Kenya’s projected GDP growth SHARE OF REMITTANCES BY SOURCE 2017
international buyers. shops when completed, with the
rate of 5.8% in 2018 is significantly retail component having opened for
EUROS
Currency above Sub-Sahara Africa’s projected trading in February 2017.
52%
average growth rate of 3.5%, making
The Kenyan Shilling remained Nairobi’s Westlands district is 33%
it an ideal location for local and
largely stable in the year, but had the focus of another largescale NORTH AMERICA
international investors. EUROPE 15%
depreciated against the major development. Here, AVIC
€ 910,000 € 835,000 currencies such as US Dollar, Other factors making Kenya an ideal International Africa is investing in a OTHER
NOV 2015 NOV 2017
UAE Dirham, Indian Rupee, investment destination include: rapid US$100 million development. The
8.2% Cheaper Chinese Yuan and Euro by 1.8%, urbanisation at 4.3% per annum complex will be the hub of AVIC
Knight Frank Research 1.8%, 4.3%, 4.2% and 6.7% versus a global average of 2.0%, International’s African operations. Central Bank of Kenya
06 Knight Frank Inside View Knight Frank Inside View 07Buying Guide
The Purchase fees for both parties when buying
an apartment. The argument for
Procedure in Kenya
this is based on the fact that the
seller’s lawyer is the one who does
registration for all the leases on
behalf of the buyer.
Thinking of buying in Kenya? Our step-by-step guide takes you
through some of the key considerations. Agency fees: The agent is paid
by the party who instructs them;
either by the seller who instructs the
agent to market the property or the
Buying Process Sale Agreement buyer who instructs the agent for a
Once the sale agreement is signed property acquisition. The fee is on a
The purchaser begins with
by both parties, the deal becomes scale capped at a maximum of 3%
identifying a suitable property for
legally binding and enforceable of the property’s value.
purchase. One needs to enlist the
services of a reputable real estate under the law of contract. The Registration and disbursement
agency/firm to assist in identifying buyer is required to pay a deposit fees: Buyers are generally
a suitable property. The buyer of at least 10% of the purchase responsible for the cost of
then should endeavour to visit price (or such other amount as registration of titles in their name(s)
the site and satisfy themselves may be agreed by both parties) together with other disbursement
that it meets the desired criteria upon signing the sale agreement. costs as may be advised by the
The deposit is held by the seller’s seller’s advocate.
including its physical location
advocates as stakeholders pending
and boundaries, and thereafter
completion of the transaction in Foreigners’ Purchasing
make a formal offer or expression
accordance with the terms of the Regulations
of interest.
sale agreement. Alternatively, the
Just like Kenyan citizens, foreigners
After an offer has been accepted, buyer and seller can mutually agree
are permitted to buy commercial
buyers should conduct due to open a joint escrow account
and residential properties/land
diligence to verify the ownership mandating both advocates to
located within a town or municipality
and other material aspects oversee the purchase funds until
without any restrictions whatsoever,
pertaining to the property and completion of the sale.
the completion documents from provided that they comply with
documentation etc. The vendor Buyers will normally then forfeit a the seller. the laid down procedures. The
also conducts due diligence on percentage, or all, of the deposit only restrictions are on owning
the buyer. if they default or are refunded the Once the buyer’s advocates agricultural land, freehold titles
said deposit if the seller is unable are in receipt of the completion and first row beach plots along the
If the due diligence process is evidence that the person named and the State relies on the amount
to complete the transaction. It is documents, they make Kenyan Coast.
successful, both parties then as the proprietor of the land is the returned by the Government Valuer
important that every instrument arrangements for the property
instruct their advocates to to be assessed for Stamp Duty absolute and indefeasible owner. or the purchase price agreed Article 65 of the Kenyan Constitution
effecting a disposition in land is upon; whichever is higher:
proceed to the contract stage. by a Government Valuer and It is also possible to purchase limits foreigners to holding only
executed by each of the parties
The procedure may vary slightly subsequently stamping of transfer land in Kenya without being in the leasehold titles for a maximum of 99
consenting to it. Execution under • 4% for land/property within a
depending on whether one is documents. Thereafter, they country. One can assign a lawyer years but permits future renewals on
the relevant Kenyan law consists municipality
buying a completed property proceed to lodge the property to go through the whole process condition that the subject property
of the person appending his/ • 2% for agricultural land or
(ready for occupation), land or an for registration in favour of the on their behalf through the power held under that title is economically
her signature or affixing his/ property outside a municipality
off-plan property. In the former, buyer. After the registration of attorney. active and it is not required for
her thumbprint or other mark as
after paying the deposit, the evidence of personal acceptance process, the seller’s advocate is • 1% if a property is registered as public use purposes. This therefore
transaction is completed within a of the instrument. Execution by a legally permitted to release the full Property Transactional a company and transfer is by way means that if a foreigner purchases
defined closure period, normally corporate body, association or any proceeds of the sale to the seller. Costs of shares rather than title a property held under a freehold
90 days from date of signing other organisation should be done in Consequently, the buyer is officially Buyers will incur certain title, it will revert to a long term
Legal fees: Each party pays for leasehold tenure. The restriction
the sale agreement (although the presence of an Advocate of the handed over possession of the transactional costs when buying their own legal fees based on also applies to companies that
parties can mutually agree on any High Court of Kenya, a magistrate, property and becomes the new either residential or commercial a percentage of the purchase are not wholly owned by citizens
closure period that suits them). a judge or a notary public. legal owner. property in Kenya. price on a scale stipulated in or property held in trust whose
In the latter, after paying the The certificate of title issued by the the Advocates Remuneration
Buying Residential beneficiary is not a citizen.
requisite deposit, buyers normally Completion Registrar upon registration, or to a Amendment Order, 2014. The
pay a percentage of the purchase On the completion date, buyers are purchaser of land upon a Transfer Property only exception which appears to This note is meant to give a very basic
indication of the purchasing process and no
price in equal instalments until the required to pay the full balance of by the seller is taken by all courts Stamp Duty/Land Tax: This levy be a common practice, is where liability is assumed as each interested person
project is completed. the purchase price in exchange for as prima facie (at first appearance) is centred on the property value buyers are required to pay legal should seek local professional advice.
08 Knight Frank Inside View Knight Frank Inside View 09Our Teams
The Kenya
Network
Our team
The London team works closely
with our network of local experts Nigeria
in Kenya. Our local agents have
been carefully selected for
their integrity, experience and Uganda
KENYA
professionalism, and speak Rwanda
English.
Tanzania
Malawi
Zambia
London
Zimbabwe
Botswana
MARK HARVEY
Head of European Sales
+44 20 7861 5034 South Africa
mark.harvey@knightfrank.com Knight Frank
in Kenya
PADDY DRING
Head of the International Department
+44 20 7861 1061
paddy.dring@knightfrank.com
RODDY ARIS
French Alps and Paris
+44 20 7861 1727
Kenya
roddy.aris@knightfrank.com BEN WOODHAMS
Managing Director
JACK HARRIS
+254 (0)733 619 031
Provence and Côte d’Azur
+44 20 7861 1139 ben.woodhams@ke.knightfrank.com
jack.harris@knightfrank.com MAINA MWANGI
EDWARD DE MALLET MORGAN Executive Director & Head – Property
Super Prime sales France and Monaco Management
+44 20 7861 1553 +254 (0)733 805 205
edward.dmm@knightfrank.com maina.mwangi@ke.knightfrank.com
ANTHONY HAVELOCK Important Notice
ALASDAIR PRITCHARD
Super Prime sales France Head of Agency © Knight Frank LLP 2018 – This report is published for general Recent Global Publications
+44 20 7861 1098 +254 (0)727 099 364 information only and not to be relied upon in any way. Although high
standards have been used in the preparation of the information,
RESEARCH
alasdair.pritchard@knightfrank.com anthony.havelock@ke.knightfrank.com
analysis, views and projections presented in this report, no responsibility Kenya
Guide to buying property in
The global perspective on prime property and investment
KATE EVERETT-ALLEN JAYNE MUGAMBI or liability whatsoever can be accepted by Knight Frank LLP for any
International Research Head of Residential Sales & Letting loss or damage resultant from any use of, reliance on or reference to
THE WEALTH REPORT 2017
+44 20 7861 2497 +254 (0)733 299 978 the contents of this document. As a general report, this material does
kate.everett-allen@knightfrank.com jayne.mugambi@ke.knightfrank.com not necessarily represent the view of Knight Frank LLP in relation to AFRICA
particular properties or projects. Reproduction of this report in whole REPORT
2017
ASTRID ETCHELLS CHARLES MACHARIA or in part is not allowed without prior written approval of Knight Frank 2017
11th Edition
Senior Research Analyst LLP to the form and content within which it appears. Knight Frank LLP
REAL ESTATE MARKETS IN A CONTINENT OF GROWTH AND OPPORTUNITY
International PR Kenya Buying Guide Africa Report 2017 The Wealth Report
+44 20 7861 1182 +254 (0)721 386 019 is a limited liability partnership registered in England with registered 2017
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