Resolve to invest in real estate in 2020

It is that time again when people make plans to achieve some noble goals in the New Year.

They fiercely vow to themselves, and even promise relatives and friends, to invest time and money in their dreams.

But how many Kenyans consider owning a house as a primary residence — the very minimum in real estate investing — as a goal worth steadfastly pursuing in 2020?

Does owning a house even feature in most people’s list of the top 10 resolutions?

National statistics point to a crisis in housing provision — a compelling reason why more people should invest in real estate.

Kenya’s aggregate housing deficit is more than two million units (a conservative estimate). Significantly, despite such a massive shortage, mortgages total less than 30,000! Who will build those units?

During the 2017 Jamhuri Day celebrations, President Uhuru Kenyatta committed, through the ‘Big Four Agenda’, to build 500,000 affordable houses by 2022 as part of his legacy.

QUALITY OF LIFE

Assuming that this goal is achieved, that still leaves a deficit of 1,500,000 housing units.

In recent years, the country has managed to add a measly 30,000 units to the housing stock annually.

At this rate, it will take at least three decades to bridge the deficit — exclusive of the new 200,000 units needed in urban centres yearly.

In the housing shortage lies a massive opportunity for people to invest, even in only one house. This is probably the best time to plan for such an investment.

The rollover from 2019 to 2020 gives all people that once-in-a-year opportunity to reflect, dream, plan and commit to become better and, generally, improve their lives.

People hope to get better jobs, make more money, become healthier, take their children to better schools, travel the world and make exciting friends.

They generally hope to enjoy a higher quality of life than they did last year. That is why they make those ‘hard-to-keep’ resolutions.

INVESTMENT OPTIONS

Putting money in real estate as an investment can bring great rewards.

For some people, buying a property and watching its value appreciate over a long time is a fine way to prepare for a financially secure retirement.

Properties such as houses, apartments, commercial complexes and other types of real estate are investment options for people to expand their portfolios.

Real estate investment needs serious commitment though. Taking the step to save a portion of the amount needed can be the beginning of this exciting journey.

For that to happen, many Kenyans have to raise their savings game. Statistics show that the savings-to-Gross Domestic Product (GDP) ratio has stagnated or declined in the past decade.

SAVINGS PLAN

Drafters of the Kenya Vision 2030 long-term development blueprint identified low national savings as one of the issues that needed fixing.

The strategy was “delivering the country’s ambitious growth aspirations required a rise of national savings from 17 per cent in 2006 to about 30 per cent in 2012”.

This goal is yet to be achieved, 11 years into the implementation of the vision.

In 2017, the gross national savings as a percentage of the GDP was estimated at 10.4 per cent — a decline from the 11.2 per cent the year before (domestic savings fell to Sh795.1 billion in 2017 from Sh807 billion in 2016).

Even the 11.4 per cent recorded in 2015 was still far below the 17 per cent in 2006.

Without increased savings, it would be difficult to seal the yawning housing gap.

AFFORDABLE HOUSING

And the ongoing urban migration appears to be worsening the housing crisis.

In the cities and big towns such as Nairobi, Mombasa and Kisumu, most of the residents — more than 60 per cent — live in slums yet more Kenyans are daily migrating to urban centres.

Notably, only 26 per cent of Kenyans live in urban areas and this population is growing very fast. In developed countries, over 70 per cent of the population lives in the urban areas.

Irrespective of where they live, everybody has to have a roof over their heads. This is a basic right.

However, the delivery of low- to medium-cost housing in the country has been slow. The key is to provide affordable housing, with affordable finance — that is, houses that cost below Sh5 million.

MORTGAGE

What people need to keep in mind is that property, unlike other investments, can be leveraged. This means it can be used to secure a lot of borrowing.

You can buy a Sh3 million property with a Sh300,000 down payment and borrow the remaining Sh2.7 million, which you will repay over a very long time — through a long-term mortgage.

In most cases, the existence of the property is security enough for a lender.

The first step, though, is to make some savings towards the goal of owning a house. Probably, this is the year to make that move. Do not procrastinate. Act now.

Mr Muratha is the CEO of Remax Kenya, a real estate consultancy firm. [email protected].