Rich people would rather put investment in their own firms than buy equity in other people’s firms. FILE PHOTO | NMG 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 […]