Watu werevu, let's discuss this...

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#1
Kenyans' preoccupation with plots of land and owning houses has completely distorted the real estate market. Today, a piece of land, around an 1/8, in a game park somewhere (remember Wakameat's comments?) is costing like 2m. An old house in Langata, about 30 years old, is now going for 12m. A simple apartment in Kili or Kile is going for 14m.

Now lets do the math.

If you have a deposit of 2m and wanted to buy that Kili apartment at Sh14m, you'd have to take a 12m mortgage, right?

At 12 per cent pa interest, that means you will probably pay over 20m for the apart in say 10 years. If you default anywhere along the way, ole wako - kila kitu goes.

If you buy the plot and build, on the other hand, you'll probably spend like 8m. Loans za Coop na bank ndizo hizo, so final price will be like 12m for a house built in the bundus.

Now THIS IS WHERE I ASK THE QUESTION, DO YOU HAVE TO OWN THE HOUSE YOU LIVE IN EVEN IF THE COST IS THIS PROHIBITIVE? In this day and age when even big firms are outsourcing, WHY CANT YOU OUTSOURCE YOUR LIVING QUARTERS (ie, rent!)

If you invested the 2m deposit in government securities over 25 years (long-term bond) for example at 13 per cent, you will be collecting about 260,000/= per year for that period (25 years).

That's like over 20k a month - enough to rent an average apartment in a good neighbourhood without any hustle - CBK simply sends you the money via bank transfer. If you save another 2m over the next five years and invest again in the money markets (bonds, shares etc), your returns will be higher...so youcan upgrade to higher-class areas with no sweat.

So why the stress of trying to own a plot/house when the factors are so unfavourable? The bank rates are 14% (developed world? 2.5%) and the land is 400% over-valued. Why risk building in the bundus where thugs will chase you out in six months or the jam is impossible (Rongai diaspora anyone?) when you can just invest at the NSE and the CBK and live just anywhere you want?

Lets discuss the merits and demerits of the two scenarios.

NA IDIOTS WA DFHKMNKD KEEP OFF!
 
#2
I think so too, but what makes paying rent unbearable is the fact that you're at the mercy of your landlord, if they wake up tomorrow and decide to hike the rent you just have to pay.
 

nairobilay

Village Sponsor
#4
Last time i was involved in a government bond they paid me the interest in advance. I invested little money at the time, only 100k. But assuming this is what they do regardless of the amount, you will have the interest with you on hand and i guarantee you, that you will not keep that money somewhere to be paying rent every month.

From your scenario, you assume that your rent and all other expenses will remain static. You know that won't happen. If anything, it will go up.

And you have forgotten that the value of the money you have put into that bond is at a hedged rate. You might up losing a little more especially in a long term bond.

From what i have observed, government bonds shouldnt be seen as some investment opportunity. Look at it as a savings plan for money that you have at the time and have no immediate need for
 
L

Luther12

Guest
#5
I'll fire the first salvo: I feel nothing for land as an investment personally and would rather consider other investments. This obsession seems almost primal at some level, at a time when there are alternative investment options. Some economists have even argued that your own private home is not an investment per se. The only reason I'd ever want to own land is to do the one thing I've always desired: rear some goats in a ranch out there in the bundus where I can always slaughter and choma one once in a while. If I can rent the land to do that, even better.
 

klevgit

Village Elder
#6
I think so too, but what makes paying rent unbearable is the fact that you're at the mercy of your landlord, if they wake up tomorrow and decide to hike the rent you just have to pay.
though that be the case it doesn't go near the home buying scenario.moreso you don't have to put up with the nonsense of the 'landlord',(haujafungwa huko!) but on the other hard ole wako the bank revises the rates of a mortgageor worse still you fail on it.itakubidi uishi na landlord atakavyotaka
 

bouss

Village Elder
#7
If only the government regulated the rental industry/market then we could make a case for it. Lakini the governments of the day cannot even manage the matatu industry therefore pushing many to seek the independence of their own kaploti.
 

nairobilay

Village Sponsor
#8
Some economists have even argued that your own private home is not an investment per se.
Those are the words my father tells me. Your home will never earn you a single shilling. Its the only assets that eats your cash.
Butbin the long run, it remains exactly that; an asset. It can always be liquidated. And that is where the reasoning in buying land in this country comes from. It has physical attributes and value can always be quantified.

While @Muranga says futures are the way to go, what are they but really just numbers that can be erased with some keystrokes.
The reason you need to invest in land is that its a solid backup plan...and yes i mean that literally and figuratively.
 

Muranga

Village Elder
#9
Those are the words my father tells me. Your home will never earn you a single shilling. Its the only assets that eats your cash.
Butbin the long run, it remains exactly that; an asset. It can always be liquidated. And that is where the reasoning in buying land in this country comes from. It has physical attributes and value can always be quantified.

While @Muranga says futures are the way to go, what are they but really just numbers that can be erased with some keystrokes.
The reason you need to invest in land is that its a solid backup plan...and yes i mean that literally and figuratively.
Its good to be optimistic but once the CMA is done with the licensing and regulation process am sure it will be profitable venture.
 

nairobilay

Village Sponsor
#11
Its good to be optimistic but once the CMA is done with the licensing and regulation process am sure it will be profitable venture.
No doubt. If i have some extra cash laying around im sure i would invest. The thing i fear is the guys on the inside who know how these things really work. Enough collusion they will mint money and can f**k you over so bad it will be damn near impossible to tell what exactly happened. Fucking derivatives!
 

Dunya

Village Elder
#12
This preoccupation with land is what makes us esp africans not think out of the box. Rather than own land at exorbitant prices i would rather invest in an active business that brings in cashflows and grows thereby and i will soon have enough money to buy anywhere i want in cash. Thats what indians did when our fathers were persuing land. Now indians buy where they want coz they've got the cash while our fathers sell coz they need the cash. The indians are in the end left with land and cash(the businesses) and our fathers spend the money and are left landless. We ought not make same mistakes. Rent and create active businesses that can make you money
 

gapcrew

Village Elder
#13
Im always busy working hard to pay the landlord otherwise ....ningekuwa idle mtaani kama nina boma yangu ....but its good to own your own house.
 
#14
And you have forgotten that the value of the money you have put into that bond is at a hedged rate. You might up losing a little more especially in a long term bond.
Please elaborate.

If only the government regulated the rental industry/market then we could make a case for it. Lakini the governments of the day cannot even manage the matatu industry therefore pushing many to seek the independence of their own kaploti.
Here is why regulee-ay-shan of ren' by de blood-claat governmen' cyaa' happen:

Our society is based on a capitalistic model. Government makes laws and formulates policies that make it easier to do business by first and foremost, enforcement of contracts - that is why we have laws on breach of contracts.

The underlying philosophy in contracts is the doctrine of privity of contract [that is, only the parties to a contract can enforce it or interfere in its operation; everybody else, stay the f**k away]. The landlord-tenant relationship is based on contract. Remember the doctrine of privity of contract? That's why the government can't do anything.
 
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bouss

Village Elder
#15
Here is why regulee-ay-shan of ren' by de blood-claat governmen' cyaa' happen:

Our society is based on a capitalistic model. Government makes laws and formulates policies that make it easier to do business by first and foremost, enforcement of contracts - that is why we have laws on breach of contracts.

The underlying philosophy in contracts is the doctrine of privity of contract [that is, only the parties to a contract can enforce it or interfere in its operation; everybody else, stay the f**k away]. The landlord-tenant relationship is based on contract. Remember the doctrine of privity of contract? That's why the government cant do anything.
But contracts ought to be fair for both parties.
 
#16
Last time i was involved in a government bond they paid me the interest in advance. I invested little money at the time, only 100k. But assuming this is what they do regardless of the amount, you will have the interest with you on hand and i guarantee you, that you will not keep that money somewhere to be paying rent every month.

From your scenario, you assume that your rent and all other expenses will remain static. You know that won't happen. If anything, it will go up.

And you have forgotten that the value of the money you have put into that bond is at a hedged rate. You might up losing a little more especially in a long term bond.

From what i have observed, government bonds shouldnt be seen as some investment opportunity. Look at it as a savings plan for money that you have at the time and have no immediate need for
Your first point: Financial discipline counts, in whatever investments you are.

Point Two: Yes, rent and other expenses go up. BUT IF YOU KEEP INVESTING EVERY OTHER MONTH IN THE FINANCIAL MARKETS, YOUR INCOME ALSO GOES UP!

Lastly, if government bonds shouldn't be sen as an investment, why are they the destination of choice for the banks making billions?
 
#17
If only the government regulated the rental industry/market then we could make a case for it. Lakini the governments of the day cannot even manage the matatu industry therefore pushing many to seek the independence of their own kaploti.
MBOSS, if you are stuck in that "serikali itusaidie" mode then you simply beta keep your peace. Na si kwa ubaya!
 
#18
There is some peace brought about by owning land or a home. You just feel secure and well grounded.
The only tragedy is the exaggerated prices.
Investments is a must to increase your sources of income to cater for the ever increasing outlets.
You have to work hard to achieve both.
 
#20
For some of us it acts as an insurance of sorts, I can always dispose it of at more than 200% the initial price when am in a corner, the 260K you speak of from the bond payouts in 25 years will be peanuts due to inflation
Just for the record, inflation in Kenya is way, way below 13%. Which, AGAIN, why the billion-minting banks invest in bonds and bills!
 
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