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In Kenya, the allure of residential real estate as an investment avenue is steadily outstripping the traditional preference for commercial properties among the affluent population. According to the 2024 Wealth Report by Knight Frank, nearly a quarter of High Net Worth Individuals (HNWIs) opted for residential property investments last year, marking a significant shift in investment strategies. Read how this trend in luxurious real estate has led to a surge in dual master bedrooms.
Contrastingly, less than 10 percent of wealthy individuals engaged directly in commercial property investments during the same period. This divergence in investment behavior can be attributed to several factors, including lower yields and sluggish rental growth experienced in the commercial sector.
Boniface Abudho, an Analyst at Knight Frank, emphasizes that the primary motivation behind the surge in residential real estate investments is strategic. He notes, "Rich individuals are deliberately viewing residential properties as both a lifestyle asset and a robust investment vehicle, driven by factors such as legacy planning, wealth appreciation, diversification, and income generation."
The evolving work landscape, characterized by hybrid and flexible work arrangements globally, has further influenced this trend by diminishing the demand for commercial spaces. As a result, HNWIs are reassessing the attractiveness of commercial real estate as a viable investment avenue.
Moreover, the oversupply situation in the office real estate sector, leading to stagnating rental growth, has dampened the potential for lucrative returns, deterring affluent investors from allocating significant portions of their portfolios to commercial properties.
Knight Frank's study highlights financial barriers as another deterrent to commercial property investment, with the costs of materials, labor, and engineering often surpassing those of residential projects. This, coupled with the challenges of obtaining financing in an increasingly expensive environment, adds to the reluctance among HNWIs and their clients.
When it comes to preferred destinations for new residential home purchases, Kenya emerges as the top choice, capturing 33 percent of respondents' preferences. Canada and the UK follow closely, with 21 percent and 20 percent preference rates, respectively.
For second home purchases, Kenya maintains its appeal among the affluent, sharing the leading position with South Africa and the UK, garnering 14.5 percent of preferences. The UK takes the top spot for third home purchases, with Kenya securing the second position, reflecting a 16 percent preference rate.
This strong preference for Kenya across all three options underscores the country's significance as a preferred location for new home purchases among Kenyan HNWIs. It reflects a renewed confidence in the country's economic, social, and political landscape, indicating an overall upswing in perception among affluent residents and their increased interest and trust in their home country.
