Couples teaming up to buy homes as mortgage bites

Couples are increasingly buying homes jointly rather than having the house registered solely in the man’s name, according to the latest Home Ownership Report.

Prepared by NIC Bank in Conjunction with real estate firm Hass Consult and Nancy Muthoni, who hosts 'The Property Show', the  report notes that as recently as 2008, more than 60 per cent of purchases were by men.

By 2012, that figure had fallen to about 40 per cent, due in part to the need for dual incomes to buy a house.

The trend towards joint buying saw the percentage of homes  bought by couples rise from 4.7 per cent to 19.5 per cent in 2007/2008.  

Institutional buying also shot up from less than one in 20 properties to almost a fifth of all purchases, accounting for 11.9 per cent of property purchases in 2012, compared with 6.3 per cent four years earlier.

These trends have led to a situation where men no longer  constitute the majority of property buyers in the country. For instance,  in 2007/2008, men bought 64.1 per cent of all properties. Four years later, they accounted for just 41.2 per cent.

The report also noted that, of all purchasers of detached homes, 56 per cent acquire to rent out, while 44 per cent to occupy the homes themselves.  None buy semidetached homes for resale. 

Meanwhile, 62  per cent of buyers acquire a semi-detached home to rent it, 35.5 per cent to occupy it, with only 2.5 per cent buying to resell.

As for apartments, 75 per cent of buyers acquire an apartment to let it out, 9 per cent to occupy it, while 16 per cent purchase for resale.

TAKES TWO, OR MORE

“With mortgage rates still putting buying out of reach for all except those on the country’s very highest salaries, one of the trends now clearly emerging is dual ownership in order to service repayments, as well as institutional buying,” said Ms Muthoni, during the launch of the report last month.

She added that such significant and striking trends can only help in understanding and better serving our market, besides  explaining the ongoing resilience in buying.

“The drivers have changed. Behind our ongoing demand and steady uptake of all that is built is a flow of new developments that is moving, for the most part, straight into the rental market, and which increasingly, is owned by a couple or an institution, in order to reach the bar of affordability,” she said.

A look at the pricing model that is reshaping the property market, alongside our affordability Index and mapping of average mortgage payments for an apartment  clearly illustrates what has happened.

Since the  price surge in late 2011 that followed the increase in  interest rates, the average repayment on mortgage for an apartment has remained firmly above Sh140,000 a month.

It will thus take two, or many more, to muster repayments on that scale, Ms Muthoni says.

Average salaries in most sectors — apart from top executives — are not enough to cover that. As a result, there is an urgent need for innovation and creativity among our mortgage lenders to bridge a gap that is clearly widening.

Not surprisingly,  the report found almost no decline in mortgage rates since the end of July 2014, when the Kenya Banks’ Reference Rate (KBBR), which stands at 9.13 per cent, was set by the government in an attempt to get banks to  lower their rates. Standard Chartered Bank continues to offer the most competitive mortgage rate, at 12.3 per cent.

The  high mortgage rates, coupled with an increase in property prices, has served to further reduce the percentage of Kenyans able to afford a home of their own.

As a result, even buying an apartment remains beyond the reach of  many professionals, with mortgage repayments exceeding average salaries earned by professionals such as pharmacists, accountants, architects, and marketers, among other careers.

MASS HOME OWNERSHIP

Only top executives and senior managers come close to earning  salaries that can allow them to make mortgage repayments.

“It’s a trend that further highlights the need to access cheaper housing finance if we are to achieve the targets set by the government in moving any significant proportion of Kenyans into home ownership,” Ms Muthoni said.

“It is my heartfelt hope that in reports in the years ahead, we shall be able to report that the vision of mass home ownership has moved closer to reality, rather than further away, and all home interest will have been a catalyst to that process, of which we will all be able to be proud,” Ms Muthoni added.

Meanwhile, the report, the first in a quarterly series of home ownership reviews which was released alongside Hass Consult’s report for the third quarter of this year, will provide current mortgage rates and loan growth data, together with new figures on property buying trends.

It will have core features, such as monitoring the mortgage market rates and development, but will have different key topics each quarter.

“It is our sincere hope that this wandering format of a special focus will be as revealing every quarter as this first report clearly is in probing more deeply into the profiles of home buyers and their reasons for buying,” Ms Muthoni said.

“Never before have we  been able to see so clearly the relationship between the development of new housing, and the emergence of a new and expanding class of landlords,” she added.