Improving  renting conditions is a good way of solving housing crisis

There is a cluster of high-end housing along Thika Road that has remained unoccupied for a year.

Even with all the money sloshing around the property market in search of an apartment to act as a reserve, the apartments are a ghost town.

I thought it was an ominous sign of a property market that has finally gone off the boil. I was wrong.

A friend of mine who works as a broker for a high-end, real estate company told me that the reason they weren’t being advertised is that they weren’t on the market.

He showed me documents that were advertising for a second phase of the project since  the first was sold out. The brochure, tellingly, had prices listed in dollars and was being circulated in international housing expos.

It is no longer a secret that the money powering our real estate boom is tainted.

The unforeseen effect of America’s clamping down on dirty money to cut off funding for terrorists has forced the corrupt to overheat the local property markets.

The money trail from several local scandals has ended up parked in high-end apartment and office blocks. Even some malls built locally were built using foreign aid money, we found out. 

Real estate has emerged as the preferred port of call for looters, and our economic growth now wholly relies on an overheated property sector.

FIX RENTAL MARKET

The economic rebasing that happened two years ago showed that property is now a bigger contributor to the national bottom line than manufacturing.

The fact that speculators are buying overpriced houses and leaving them empty as safety deposit boxes should worry the locals. 

Nairobians should now know that to live in this city, you will have to compete with Eastern Africa. Eastern Africa has come to the capital. We are a good fit, we speak English and are very relaxed about dirty money. Even Osama Bin Laden at one point owned fishing boats in Kenya. 

Speculators are probably planning a gentrification that will be unleashed on older housing stock in Starehe Constituency when it is politically convenient.

Multimillionaires of questionable virtue are buying out the local property market, making it harder for locals to move in.

These money-is-no-object buyers have made property prices out of kilter with economic realities. Nairobi isn’t bound and is free to sprawl. Cities like New York and Monaco, which are bound by water, have very high property prices because land is at a premium. London is bound by a green belt that has the same effect. Nairobi is free to stretch out, yet its property prices continue their vertiginous climb. 

This state of affairs offers us an opportunity to fix the rental market. Even the solidly middle class are being forced to rent in the capital, meaning that the base feeling the pressure of the supercharged property markets is widened. Housing is a service, not a product. For too long, housing has favoured landlords rather than tenants.

In Kenya, buying property for personal use does not make much sense.  Housing remains an emotional decision; it doesn’t make much sense to tie up so much wealth in bricks and mortar.

A mortgage, in particular, is a form of sadism or financial incompetence. Some think that buying a house through a mortgage, for example, allows you to increase equity in what is potentially an appreciating asset. Well, at all mortgage rates offered by Kenyan banks, renting is by far the better option.

At 10 per cent interest, for example, your mortgage payments could buy the house you are living in every seven-and-a-half years. So the price needs to have doubled by then, if you are looking to make a profit, but it probably won’t have. Mortgages attract interest of about 19 per cent in some banks.

The interest rates, insurance and legal fees that accrue are also on you.

PERMANENT LOCATION

Whatever house you are living in, the safer bet would be to rent it and invest the extra money you save and be better off.

Despite this, property ownership has become a form of pagan religion. The Kenyan dream is to buy on the low then offload it on a bigger mark while prices are high.  Many Kenyans, surprisingly, think that owning the house you live in is superior to renting it. They seem to want to own more title deeds under their names than degree certificates.

Demand for homes locally astronomically outstrips supply. The answer is to build homes for rent, not for sale. Buying encourages people to misallocate housing resources. Lots of old, rich people live in empty mansions long after the children have left, simply because they own the house.

The main reason to buy a house would be to hedge against future increases in rent. This has never made any sense. Take a house in Mlolongo: renting it would cost you less than Sh30,000, while monthly servicing of a mortgage will cost upwards of Sh70, 000 – after a hefty down payment.

Some view renting as financially precarious but it still remains a more prudent financial decision compared with buying.

Germany does a lot better than its EU counterparts partly because most of its citizens rent rather than buy houses. Buying locks you into a permanent location and makes labour immobile. An economy built on speculation to do with mortar will always be found out when the taps of cheap credit turn off. 

Even as we clean the dirty money throughout the economy, we should start campaigning for stronger tenancy rights and longer lease arrangements.

_________

FREEDOM HEROINE

Harriet Tubman: too little to late

AMERICA’S PUBLIC RESPONSES to racial issues are often puzzling.

Take that time when a racist in South Carolina walked into a church and massacred nine people.

The response was to pull down a confederate flag that was viewed as racist. Call me a cynic but I think the best way to honour the victims was to ban automatic rifles. Flags never killed anyone. Racists with no guns are less scary to minorities.

All flags have had soldiers and officials marching under them do despicable things. When America was stealing Mexican land, the soldiers marched under a variant of the current Star-Spangled Banner.

When America pulverised Cuba in the Spanish-American war, they still had the same flag. When they nuked Japan ditto. Tuskegee experiment to give Black men syphilis, same flag. Japanese internment in the Second World War. Illegal Iraq war. Lots of horrible things to minorities have been done under the aegis of the current American flag. Flags aren’t the problem.

The latest racial issue to be addressed with meaningless tokenism is putting Harriet Tubman on the front of the $20 bill from 2020.   The back of the bill will have a slave-owning, genocidal, racist American president who is currently on the face of the $20 bill.

It is a bit like putting Oskar Schindler, who saved a thousand Jews from the Holocaust, on the front of a bill and Adolf Hitler on the back.

Even when honouring a minority, they manage to sneak in an insult.

***** 

GAMBLING PROBLEM

Basketball a surer bet than football

I USED TO FIND GAMBLING an intensely dislikeable activity. It is rigged and is predatory on the poorest. It relies on addiction to grow. Unless the marks come from another geographical location, it drains the local economy.

It is a vice, and partly why there has been a rebranding exercise to change its name from gambling— which Christianity has always been uneasy with —to gaming. Nowadays, gaming has been recast as a completely harmless activity.

I have since mellowed and dropped the mother-hen concern. People should be free to seek out financial ruin as they see fit.

However, the sports Kenyans gamble in are ill-advised. Most Kenyans bet on football while several local “gaming” establishments offer other alternatives.

Basketball games have only two possible outcomes, football has three. In football there are draws, in basketball there must be a winner. If preserving money was your goal, basketball would make more sense due to fewer distinct results. If you want to make money, basketball is still better since the multipliers are larger than football in many games.

The only reason to bet on football over basketball is if you are doing it to prove how much of the game you know.

So if you must punt on sports, you are better off betting on basketball.