Kenya’s super-rich bet on improving economy to grow wealth – Knight Frank

By Victor MUJIDU

Kenya’s super-rich investors bet on economic gloom to grow wealth, according to a recent report by Knight Frank, which shows that about 31% of Kenyan high net worth individuals (HNWIs) were expecting their wealth to grow in 2024.

This indicates a positive outlook among the wealthy population in Kenya despite the challenges posed by the global pandemic and economic uncertainties.

The report also highlights the growing confidence and optimism among HNWIs in Kenya, with many of them looking to invest in opportunities that offer strong potential for wealth creation.

Key sectors that are attracting interest include real estate, technology, and agriculture, among others.

Additionally, the report notes that HNWIs in Kenya are increasingly diversifying their investment portfolios to mitigate risks and maximize returns. This trend towards diversification is seen as a strategic approach to safeguard wealth and take advantage of emerging opportunities in the market.

Overall, the findings of the report suggest that the HNWIs in Kenya are poised for wealth growth in the coming years, driven by a combination of factors such as a favorable economic environment, investment opportunities, and a positive outlook on the future.

Although this negative view is a minority one, it adds a nuanced viewpoint to the general feeling among Kenya’s high-net-worth individuals.

“As I said in the beginning, the wealthy expect that their wealth is going to grow here locally; 60 plus per expect their wealth to grow and be a positive thing for the market.”

“Ultimately, that money trickles back down into the market, and I think one of the other things worth mentioning regarding residential acquisitions here is the lack of a really functioning mortgage market, and the fact that interest rates are so high means that a lot of these acquisitions are done with pure equity, and so that demonstrates the level of liquidity and dry powder in the market that people are able to go out and buy million-dollar plus houses with cash,” commented Mark Dunford, the Knight Frank CEO.

The prevailing sentiments among Kenyan HNWIs reflect a sense of increased confidence in the country’s economic growth. These findings align with recent World Bank projections, indicating that Kenya’s economy is set to grow at a faster rate of 5.2 per cent this year.

This growth is expected to be boosted by increased private sector investment as the government reduces borrowing from the domestic credit market.

“I talk to a lot of investors about their investment portfolios; we’re seeing a lot of investors look at non-investments that have paper investments that will yield from these high interest rates rather than tangible assets.”

“So if they can gain the advantages on interest rates by investing in bonds, or whatever it is, they’ll take that the effect it has on the real estate market is that the cost of debt is so much higher, so we’re seeing less borrowing and a lot more cash investment. And that obviously means it ties in with the trend of investing in commercial real estate,” added the CEO.

Further, according to the latest Global Economic Prospects, a World Bank Group flagship report, growth in non-resource-rich countries such as Kenya is projected to strengthen to 5.4 per cent in 2024 and 5.7 per cent in 2025.

The HNWIs’ hopefulness for a better 2024 could also be attributed to the political stability in the country, which offers a conducive environment for investment purposes. The survey reflects diverse expectations within the high-net-worth community, and the overall sentiment points towards a positive trajectory for wealth accumulation in Kenya in 2024.

Meanwhile, the country’s High-Net-Worth Individuals (HNWIs) surpass the global average, including green priorities in their investment portfolios. Knight Frank’s annual Wealth Report 2024 shows that over 90 per cent of Kenya’s High-Net-Worth Individuals have embraced green thinking in the properties they invest in.

The report reveals that the spending habits and priorities of the country’s wealthiest individuals recorded a surge in the use of renewable energy, with 60 per cent of HNWIs seeking solar panel installations in the properties they invest in, up from 35 per cent a year ago.

Kenya’s attitudes survey, which is based on responses from private bankers and wealth advisors, also found that almost half of HNWIs, at over 46 per cent, now review the impact on nature and biodiversity of their assets.

“These results confirm Kenya’s HNWIs have surpassed the global average of including green priorities in their investment portfolios, and they also align with Kenya’s leadership position in renewable energy and its focus on the importance of building certifications.”

“This all serves to support the country’s target of reducing its carbon footprint by 32 per cent by 2030,” said Mark Dunford, the Knight Frank CEO.

Carbon cutting is becoming an increasingly urgent global priority as temperature rises accelerate and erratic rainy seasons, droughts, and cyclones become more common.

In efforts to mitigate this deterioration, 40 per cent of Kenyan HNWI investors are now seeking green certification and energy ratings for their priorities, up from 30 per cent a year earlier.

This has brought a surge in demand in the country for BREEAM, LEED, DGNB, Green Mark, and NABERS green and sustainable building classifications, delivering energy savings per building, as great as 53 per cent, as well as 42 per cent water savings and 35 per cent carbon savings.

This rising attention to efficient resource use follows global findings released by Knight Frank in 2023 that found 70 per cent of Kenyan HNWIs were already assessing building materials for their carbon footprint, compared to 30 per cent of HNWIs worldwide.

“We are seeing a clear trend of environmental leadership across Kenyan HNWIs, and while this is centred on their carbon footprint, it is also extending to their attention to their environmental impact, with increased environments to green roofs, open spaces, and community facilities such as cycle tracks and electric vehicle charging points,” said Boniface Abudho, Research Analyst at Knight Frank.