African property market spells opportunities while London is for the long-term, says Knight Frank chief
Rising investments in infrastructure in Africa will augur a rise in property values, according to the consultancy
Knight Frank, one of the world’s leading property consultants, is in the midst of a five-year expansion plan covering 12 target cities and markets: San Francisco, New York, London, Berlin, Paris, Dubai, Mumbai, Nairobi, Singapore, Hong Kong, Shanghai and Sydney.
In Africa, Knight Frank Chairman Alistair Elliott said that Nairobi, Kenya, would be Knight Frank’s “access city” to the continent. “We believe that the African continent in the next decade is only going to develop in one direction, and that is generally more stability, generally more transparency and generally more business confidence.”
He noted that rising investments in infrastructure generally augur a rise in property values. China’s infrastructure investments in Africa are well known. In June 2017, Kenya opened up a new 470-kilometre rail connection between the port city of Mombasa and Nairobi, a US$3.2 billion project funded by China, and in May, the Nigerian government awarded a US$6.7 billion railway project to a subsidiary of China Railway Construction Corporation to build a line connecting the capital, Lagos, to Kano, the second largest city.
Meanwhile, many Hongkongers have made significant investments in London’s property market, and recent news has not been good. The prime market has dropped 0.7 per cent in the year ending December 2017, according to Knight Frank data, while prime property in Amsterdam, Frankfurt, Madrid and Munich all saw double-digit growth over the same period. In the UK, Brexit uncertainties and rising stamp duties have caused prices to drop.
Yet, Elliott remains optimistic about London’s longer-term prospects.
“The markets have stood up (to Brexit fear) incredibly well. If you roll back the clock two years, people were giving gloomy forecasts; it hasn’t happened. We have the details of Brexit to come [and] I do not believe it will be as aggressive an experience for London real estate markets as people originally thought.”
Elliott reckons London will offer good buying opportunities over the next year or so, but for longer-term purchases. “Buying to sell in six or 12 months time, I would be cautious. Buying to sell in five or 10 years, I’d say: carry on.”
Other sectors that have Elliott excited are commercial property plays that leverage the new economy. In particular, the rise of e-commerce is a boon for logistics and warehousing. “It’s almost a sexy sector,” he said.
Automotive is another sector to which Knight Frank is paying more attention – a dedicated team is being set up just for this. The rising number of electric cars will need more charging stations, along with more service support stations and showrooms, presenting opportunities.
There are risks. Elliott keeps a sharp eye on US interest rates, acknowledging the threat that rate rises may come faster than expected given the super-charged US economy. Meanwhile, cooling measures such as stamp duties and taxes on property speculation enacted in major cities in the world, “are probably here to stay.”
(The full version of this article is published in the June issue of The Peak magazine, available at selected bookstores)