The truth about our economy 101
Our economy is performing poorly in many sectors.
For the last 20 years, most Kenyans from professionals to hawkers have been putting their money into property. So much money has been sunk in Buroti (plots) that I shudder to imagine where we could be today if we did not have a item called Buroti in our economy.
I have waged a one man campaign advising people to be wiser and resist temptation to bury their hard earned money in dead investments like buying plots and shamba they are not utilising to generate cash flow . Or buying a home on mortgage which cost them more in repayment than the rent they get from the unit.
Example ; A two bedroom unit in a flat that is costing 8 million payable in 10 years will cost the buyer upward of 123,000 per month to service. This is unreasonable. The rent for such a house is around 30 to 50 k per month. This means you are paying more than 70k per month for someone to stay in your house if you rent it out. If you stay in the house, you pay 3x the going rent in the open market. This is not financial intelligence.
The lie told to gullible buyers is that land appreciates in value. Truth is the rate of appreciation is too low if any. Below the inflation rate. See the figure below from Cyton weekly report on changes in land prices in 2018/2019.
It is unfortunate many educated people have fallen into this trap. Others buy a plot and spend so much to build a house or flats for rental which cannot service the investment loan. They use salary from employment or bring down a business to service the loan they took to build a home. What is this thing with Kenyans wanting to own a house?
This happens despite the evidence in financial numbers pointing against. We are in the era of big data. Truth is rental income in Kenya has been going south. None of the property sectors is making profit. The most affected is commercial houses starting with malls. The occupancy rate is below 65 percent. Many malls are enticing customers by giving 6 months’ rent free and half rent the next 6 months to attract uptake to boost occupancy. They no longer charge goodwill in malls
Commercial offices space suffer the same problem. Britam towers occupancy is less than 30 %. UAP/Old mutual tower is at 38 %. If you drive along Ngong road, the most conspicuous sign is “To Let”. This is proof there is more floor space on offer than demand. This have depressed rental income to an all-time low
See the analysis below
Why do our people continue investing in property?
Answer. Lack of financial knowledge
This is the kind of knowledge we offer in Azima Wellness. We tell you the bitter truth. We do the Maths with you because numbers don’t lie.
What is the big lesson here?
Keep it here for the options that will pay good dividends above inflation and interest rates.
With profound respect,
Coach Maina Azimio.
ICF- Accredited CPC & CPM
Conference Speaker and Corporate Trainer in Wellness.
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