Ibrahim Mwathane

Ibrahim Mwathane 

 

When I wrote an article suggesting that sea piracy proceeds were fuelling escalation of property prices in some Kenyan cities, I received a lot of flak.

There was sufficient empirical evidence. Piracy was escalating and fast cash was apparently getting into Kenya’s property market.

Sudan, Ethiopia and Kenya, which neighbour war-torn Somalia, were good destinations to launder and invest the piracy proceeds. Before writing the article, I had travelled to Garissa and witnessed a booming real estate market.

Business people in Mwingi, Kitui and Thika told tales of properties being snapped up at inordinately high prices by a new cartel of investors.

Prime properties available for periodic renting were receiving irresistible long term rental offers in cash.

Seasoned businessmen who couldn’t cope had to pack up. In Eastleigh, Nairobi, properties that hadn’t moved for years were selling fast and well.

In Nairobi, I witnessed the subdivision processes for properties in high end residential neighbourhoods being halted mid-stream as owners received cash offers for the whole entity. The offers were much better than the owners would ever receive from selling individual subplots.

But look at the urban centres affected. Not Kakamega, not Nyeri and not Narok or Kisii but Garissa, Mwingi, Kitui and Thika.

Then the major commercial centers of Nairobi and Mombasa which are easy entry points.

Mombasa sits right next to the piracy belt. It’s easy to move cash and invest. Garissa, Mwingi, Kitui and Thika mark the most probable transit route for cash from up North before Nairobi.

Such hard empirical evidence doesn’t require rocket science analysis for us in the property industry. Alternative diaspora cash would spell a totally different investment pattern. And it usually will move through established financial institutions and not hard cash.

But operation “Linda Nchi” may have spoilt the feast. It may be only a matter of time before the effects hit the property market.

The security forces are in control of the entire route to the North thus limiting the movement of people and goods. It’s worse for movement along the coastline.

The Kenya Navy slapped a curfew along the coastline soon after the war against the Al-Shabaab terror group started last year.
Without commercial trade and cash

ransit routes, piracy becomes rather frustrating.

What does one do with bagfuls of money they cannot easily spend or ship out? It’s now harder to seize vessels in the Indian Ocean and to effectively move any piracy proceeds beyond Somalia. With diminishing cash, properties in the front line towns may get harder to move.

This reality was brought home faster as I discussed property trends with a real estate agent who had opened an office in Eastleigh. He told me that he closed the office soon after operation “Linda Nchi” got under way. A government statement that the head of Al Shabaab was in Eastleigh hadn’t helped matters business.

What with wheeler dealers expecting security personnel to subsequently descend on the suburb. He told me that nobody was chasing property anymore. Buildings for sale or rent weren’t moving…..a nightmare scenario for any estate agent. He moved out to cut losses.

The slowdown in Eastleigh could inform “errant” property prices elsewhere within Nairobi. I doubt Mombasa, Garissa, Kitui and Mwingi will be spared. And movement of prices in Nairobi and Mombasa could have a gradual ripple effect countrywide.

It’s good for market stability though.
mwathane@landsca.co.ke

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