Rethink the Kenyan Home Ownership Dream

If Kenyans have a preoccupation these days, apart from quail farming and other get-rich-quick schemes, it seems to be real estate.

For many years, we have cultivated the homeownership dream – believing that buying a home is a great investment and a ticket to a secure future.

We have also been made to believe that house prices always go up, and never down and that predictions of Kenya’s property bubble burst are premature.

This easily explains the ever-rising prices in most parts of the country, including rural towns such as Bondo in Nyanza where land prices have gone up 1500 per cent in 12 months as investors rush to meet “high demand for housing in the region”.

Is this a bubble? Will the local property market crash? The answer depends on who you ask. Some people argue that the high prices of homes in Kenya are based on pure fundamentals – demand and supply, while others believe the prices are exaggerated and that a major correction is imminent.

So far so good, but perhaps we should all rethink the Kenya home ownership dream for several reasons.

1. Affordability. Average land and house prices in the country have quadrupled in less than a decade outpacing nearly all markets worldwide.

Indeed, Nairobi is already one of the most expensive cities in the world in which to buy a high-end home – according to a study by the Global Property Guide.

Realistically, for the average middle-class Kenyan, the dream of owning a home is beyond reach in most parts of the country. However, with the expectation that the higher prices will go higher, some individuals are taking bank loans to acquire new homes.

According to a report by Hass Property Index, high interest rates make loan payments twice as expensive as renting the same home. This means that individuals taking loans to buy houses are making losses even where the units are rented out.

2. Dream investment. This notion that home ownership is the key to a secure financial future has seen many Kenyans falling for pyramid schemes as they desperately seek to raise cash to buy their dream houses.

But Nobel Prize-winning economist Robert Shiller (a renter) questions the value of home ownership as an investment.

RELATED: 7 Possible Solutions to Kenya’s Housing Crisis

“Here is the harsh truth about home ownership,” he wrote in the New York Times. “Over the long haul, it’s hard for homes to compete with the stock market in real appreciation.”

What’s more, housing is an “ambiguous investment to evaluate,” he says, because it’s an emotional investment, not just a financial one.

Rethinking the homeownership dream, therefore, demands that we start questioning the notion that real estate investment is the only way to a happy retirement and a fast way to attain “Vision 2030” at personal levels.

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