Real-estate prices rise in Nairobi. Who do you blame? Somali pirates.
Suppose you’re a pirate. You’re sitting on a pile of ransom money — it topped $100/million a year during the piracy boom. You need to launder it, and store it somewhere more secure than Somalia. So you turn to construction, that classic route for cleaning excess cash. Looking for somewhere reasonably close, with a large Somali community, you end up in Nairobi.
A government investigation has been launched into soaring property prices in Kenya amid claims that Somali pirates are behind the unusual real estate boom which has seen prices increase three fold in the last few years.
In a neighbourhood of Nairobi now called ‘Little Mogadishu’ because of its Somali community, large business and apartment buildings have sprung up. A similar explosion of real estate development can be seen in higher income areas of the city.
It’s a nice story, but it doesn’t quite add up. Criminal house-building should lower prices, not raise them. Purchases of existing buildings might increase sale prices, but won’t much affect rentals unless the Somalis are living in Nairobi.
Besides, there just isn’t that much money in piracy. Nairobi’s GDP is perhaps $24 billion. $1000 million from piracy is a drop in the ocean
Most likely, the pirate housing story is just another way of blaming foreigners for local problems. It’s certainly causing difficulty for Nairobi’s Somali population:
Yet mud sticks, and many Somalis are concerned that the small of amount of pirate money coming through Eastleigh will continue to damage the neighborhood’s reputation.
“If piracy money is allowed to infiltrate into the local market here in Eastleigh, then our hard-earned money will be spoiled and soon we may close our line of businesses,” said Diriye Jamal, who owns a textile shop.