I grew up in a setting similar to a gated community. As kids, most of us in the neighbourhood knew that the houses where we lived were our homes. There were no other places but these houses. Home is where the heart is, right? In this setting, there were houses for the ‘big guys’ at our parents’ workplaces. Each was set on a massive compound, had an open kitchen concept and a detached DSQ that had a car garage. The principal’s house  had a garage that could accommodate two cars. Most of the other houses were semi-detached, each unit complete with a DSQ. A live cypress fence separated one unit from the other. From the gate, you would enter a lush green frontyard. Some people cultivated these front portions and grew vegetables or maize, leaving the edges of the compound to flower gardens. One house belonged to the farm manager’s family, the next one to my dad’s friend and the other to the principal’s family. We believed each occupant owned the houses they lived in. Until the day we realized that we lived in the staff quarters and our stays were defined by the productive years that our parents served these institutions. Then our friends began moving out when their parents were retired, transferred or retrenched. This realization dampened our spirits.

Nowadays, it is quite hard to come across a job where your employer has private staff quarters for the members of staff. Everyone in your office most likely rents a house in a particular neighbourhood. Fewer own the houses they live in – some built while others bought. Others inherited the houses they live in.

While having a chat with a few friends sometime this week, I asked them a few questions: Would you like to own a home? Why would you want to own a home? Can you spend your hard-earned money on an apartment? Would you buy a house in a gated community?

Three of them mentioned that they want to stop paying rent to their landlord or any landlord for that matter. Others said that owning a home would give them a sense of security – where should the worst happen, their loved ones will not be kicked out of their home. It was interesting when some said that owning a home would give them a good feeling – that feeling you get when you are liberated from paying rent to the landlord, who would kick you out a minute after you default on your rent.

“Your life is your own. You know what is important to you. If you have time and land, build. If you have cash and time, build. If you have cash but no time, buy. If you have no cash and no time, pool or invest in business instead. If you travel a lot and do not know where you will be in future, you are better off renting.” – Arch. Noel Okello

Would you call a house where you and your family live in a home? Or should you own it for it to qualify to be a home?

Home ownership is a topic that should concern you. Whether you are a tenant or a person who intends to own your home one day. It should also concern you if you already own a home. It is my personal view that understanding home ownership can help you make a decision on whether to build, rent or buy.

Sometimes as Kenyans, I find that we talk so much about renting a home as if it is a bad thing. Similarly, we don’t want to admit that buying or building one is a challenge that many aren’t willing to face.

Why do you want to own a home?

When something such a house belongs you, it elicits different thoughts, ideas and emotions. Some people feel proud when a house belongs to them. To others, it gives them a feeling of accomplishment. For instance, I attended a forum on Wednesday evening where the facilitator asked us a question.

“When did you realize that you had finally become a man?” he asked.

“When I got a house,” a young member of the audience replied.

“Yes,” the facilitator responded. “It must be a good feeling when you are paying a mortgage instead of paying rent…”

“I didn’t mean that I bought,” the member interrupted in clarification. “When I moved out of my parents’ home and began paying my own rent. It was my first house.”

That tells you what renting, buying or building and living in your own place can make you feel.

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Residential house in Nairobi

Emotional Connection

We are emotionally connected to the places we call our homes. How did you feel when you were moving out of home to a different place? How did you feel when you were moving houses? Packing and moving houses are emotionally intense activities. Neighbourhoods elicit certain memories due to the experiences and moments spent around homes and the communities around them. Therefore, some people want to own homes so that they can connect with a place in such a way.

You might want to own a home because of the status it will give you. Status comes with the neighbourhood and environment. Maybe you want to own a home in Karen or Muthaiga, complete with a gate sign engraved with your name. Perhaps, living in a big house in your own compound demonstrates your financial stability.

Others view a home as an investment. In case you bought or built it, it might pay off a tidy sum a few years down the line should selling be an option. Maybe, by renting you get a chance to save up for a deposit for land or another house you intent to buy or build.

Who rents anyway?

It is said that a majority of Nairobi residents rent the houses they live in. A study showed that a typical household spends, on average, approximately one-third (30-33%) of their income on rent. The 2014 housing survey report indicated that people living in Nairobi City spend 40% of their income in rent and related expenses. Who are these people?

Most houses for rent are targeted towards young Kenyans who are young and in early stages of their careers. This segment does not earn enough to even pay a fraction of a mortgage deposit. Oftentimes, they are fresh from campus and are on probation at their workplaces, with a little money to keep them surviving. Some share a small apartment while others start out independently.

Other people who rent include those who may be in jobs that make them mobile. Also renting may be ideal if you are new to a town or county.

Renting, therefore, is one way of owning a home. Basically, you are paying an amount of money for the space you are living in for a specific timeframe. As a tenant, you do not enjoy any investment benefit from the property.

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High-end residential house

Home prices and rent

Buying a house is a very expensive endeavour. Building a house in Kenya today is, arguably, equally as daunting as buying. Generally, house prices in Nairobi and urban Kenya are on the rise for three reasons:

First, the demand for housing in Kenya is rising due to a growing population. The supply does not match the need. Consequently, this pushes the prices upwards.

Secondly, the initial costs of buying a house are high. Flip through one of the online property listings and go to the section where houses in your dream neighbourhood are listed. Look at the price. Typically, you will be required to pay a 20% deposit on the property if you want to buy. Calculate 20% of the figure in the price tag. Not many Kenyans can raise that figure you are staring at. Although the prices in Kenya fluctuate, the general trend in prices is upwards. This one hurts the young and low income earners who live at the mercies of their landlords.

“Are you willing to wait or are you impatient? Rents do not rise as dramatically as the costs of house purchases. People will not be paying even in 20 years Kshs 300,000 rent for a current Kshs 35,000 rent house. Anything that takes money out of your pocket is a liability. Conversely anything that puts money in your pocket is an asset. Do you desire liquidity or stability? If liquidity, rent a house and do some business. If stability, get a mortgage you can pay and get insurance for it.” – Arch. Noel Okello

Third, the interest rates in Kenya are high. This raises the cost of borrowing money to either build or buy. Mortgages and home loans are all dependent on the bank interest rates which are revised from time to time depending on the market conditions. Mortgages are relatively expensive in Kenya although banks are seeking innovative ways of making it a bearable and attractive option.

These three reasons, when combined with other factors, push the prices of homes higher by the day. However, in the case where the prices of homes are growing at a high rate, buyers have the incentive to buy since they are considered to be an attractive investment with lucrative returns. In this case, tenants would find it hard to move away from the landlord into their own homes due to the rapidly increasing house prices that locks them out of the buyer’s market.

If you are renting a house at a time when homes in the market are experiencing a rapid spike in prices, homes become too expensive to buy. As a tenant it becomes difficult for you to buy. A high interest rate complicates this scenario further.

If you buy a house successfully you will, unlike the tenant, enjoy the investment benefit from the house. The home is expected to increase in value over time. Generally, you just might end up spending less on housing per month compared to renting. However, it will take long to liquidate the house in times you may want to sell.

On the other hand, if you are renting, you can rest assured that your rent will be revised at the time you will be renewing the lease.

There is a lot of salesman talk where the value of plots around Nairobi County “double after two or three years” and so on. The reality that we sometimes fail to appreciate is that house and land prices do not appreciate indefinitely. If you own a home as a form of investment, it will fall under your list of assets under your name. Worst case scenario, should the housing market experience a dip in prices, the tenants and relatively lower income earners will be able to afford the down-payment required to purchase a house. This is because the value of the house will be watered down.

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Apartment development in upmarket Nairobi

Too many options?

As Kenya’s population grows, the demand and need for quality changes accordingly. The supply side consisting mainly of developers, react to different housing needs.

There are apartments for sale and many more for rent in Nairobi. Some of you sneer at the idea of buying or even renting a “house in the air” called an apartment. Some still find such settings secure and they enjoy the community around apartments.

Maybe you dream and desire to live in a house set in its own compound with all the privacy you desire. You may like the idea of that stand-alone house in a gated community setting or not. You may like the gated community for the shared amenities that save you a lot of money and headache. You may dislike it because of the monthly service charges. Or any other reasons or perceptions you have towards these options.

Generally, there are many options available in the market. There are many housing solutions for different user needs. Financiers are also formulating innovative ways to make it easy for you to own a home, for example, the 105% mortgage products – Housing Finance’s Ezesha Mortgage, CBA Bank’s OYOH and KCB’s mortgages and home loans. Some employers also negotiate mortgage plans for their employees with mortgage institutions.

“What is your household like? Are you paying fees? Loans? Bills? Note that house payments will include standing charges, council rates, maintenance and repairs. If you choose to let out your mortgaged building sometimes renters will default. Or damage the house. Your neighbours may also bring the slums close to you and so depreciate the value of your house. As you get old you will also need money for health checks.” – Arch. Noel Okello

There are ways through which rents in the real estate market can be lowered. One, if developers choose to meticulously plan and execute “rent to buy” arrangements, there will, most likely, be a big shift among the tenants who will choose to channel a given amount of money towards housing: towards owning the house. Two, if the government revisits public housing schemes – through National Housing Corporation (NHC)– like it did in the 1970s, there will be an increase in the number of houses in supply. This will, in turn, push down the prices.

Ultimately, there are risks and rewards on whichever route you choose to take towards home ownership. As one author mentioned, when it comes to investment in real estate, rewards are always based on risks.