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Bubble bust..... myth or reality?
Rank: Member Joined: 11/16/2007 Posts: 16
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Hi all, i came across this write up in the dailies today and it caught my eye.Quite an interesting read. However, a number of people here have stated previously that they don't see this happening any time soon. Are we being ignorant or will this come to pass? Given the current circumstances and all other factors remaining constant e.g oil in Turkana/natural resources, double digit pursuit, devolution, security etc Only time will tell... http://www.nation.co.ke/...4/-/107huuc/-/index.htmlHow much would u be worth if you lost all your money?
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Rank: Elder Joined: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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I saw this and as a proponent of the bubble burst-wont-happen side, I'm rethinking my stand. Kwanza now we are buying Oltepesi...ok. Wapi @architect
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Rank: Veteran Joined: 11/2/2006 Posts: 1,206 Location: Nairobi
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The writer to me has not shown why the bubble will burst.Si guys are still buying the "overpriced" houses?This is likely to happen as long as we dont have good roads/rail networks. Formally employed people often live their employers' dream & forget about their own.
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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[quote=mashugli]Hi all, i came across this write up in the dailies today and it caught my eye.Quite an interesting read. However, a number of people here have stated previously that they don't see this happening any time soon. Are we being ignorant or will this come to pass? Given the current circumstances and all other factors remaining constant e.g oil in Turkana/natural resources, double digit pursuit, devolution, security etc Only time will tell... http://www.nation.co.ke/.../-/107huuc/-/index.html[/quote] The article is written by a lawyer. If it was done by an economist, i would take it more seriously. Life is short. Live passionately.
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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Poorly written article.
1. House prices in the West are "cheap"
that's none sense. He is comparing Commuter areas in London eg Sussex to prices in Westlands, which is more or less, CBD. If we were to compare potatoes to potatoes, then in London, Knighstbridge specifically, a 2Br flat is £1.95M compared to Westlands where a 4br flat is 20-25M with all facilities. In South Africa, Joberg specifically, a 4 Br flat in Sandton, is about 10m rand. If he wants compare commuter areas, he should compare Sussex to Ruiru where a nice 3Br house,is in £300k mark and ruiru is at Kes 6m.
2. What led to the downfall of the housing markets in the west a few years ago was mortgage defaults. In the west, the mortgages given were for upto 20% more than the value of houses ie 120% mortgages. In kenya, we have a big shortage of houses in urban areas and a fraction of 1% in mortgages. The rest are cash buyers.
3. As a comedian once said, " Kenya is in Puberty while the west is on menopause" I believe he might have been referring to the economy. The west are mature economies whereas ours are still growing.
4. If your house is 1M and in a year, it's 1.15M is that really "exponential growth" or is that just keeping up with the high frontier inflation? In dollar terms, the increase in property prices isn't as large as he makes it out to be on a longer spectrum.
5. Buy-to-let in Kenya is very consistently holding 5% on current values. Whereas in The west, these metrics hold for a measly 3% net. Pointing to overvaluation on those parts of the world. There are obviously exceptions especially on the foreclosure properties but there luck is more involved than anything else
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Rank: Veteran Joined: 3/25/2010 Posts: 939 Location: Nai
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The article has ideas that seems to be picked randomly from different sources doesn't clearly tell us what will lead to the bubble burst. This guy is not telling us about the indicators that shows we are headed to a burst.
But bubble or no bubble property prices are ridiculous in Kenya they must correct at some point. Am yet to really understand the factors we are currently using to value land and houses may be @A4architect anaeza saidia. Take for instance Syokimau and Kitengela soon they will be beyond middle class yet when it rains most leave their cars and walk better still there is no drainage and sewerage services what are we selling??
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Rank: Member Joined: 7/17/2011 Posts: 627 Location: Mbui-Nzau, Kikumbulyu
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a Safaricom IPO scenario type of a situation ..over capitalized over subscribed ..there has been a gradual build up to this..which eventually means diminished returns ..it may be even cheaper to rent rather than own a house...basically its a warning to cash out before the house of cards collapses ..because it is not about IF ..but when..
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Rank: Member Joined: 1/15/2010 Posts: 625
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Horton wrote:Poorly written article.
1. House prices in the West are "cheap"
that's none sense. He is comparing Commuter areas in London eg Sussex to prices in Westlands, which is more or less, CBD. If we were to compare potatoes to potatoes, then in London, Knighstbridge specifically, a 2Br flat is £1.95M compared to Westlands where a 4br flat is 20-25M with all facilities. In South Africa, Joberg specifically, a 2 Br flat in Sandton, is about 10m rand. If he wants compare commuter areas, he should compare Sussex to Ruiru where a nice 3Br house,is in £300k mark and ruiru is at Kes 6m.
2. What led to the downfall of the housing markets in the west a few years ago was mortgage defaults. In the west, the mortgages given were for upto 20% more than the value of houses ie 120% mortgages. In kenya, we have a big shortage of houses in urban areas and a fraction of 1% in mortgages. The rest are cash buyers.
3. As a comedian once said, " Kenya is in Puberty while the west is on menopause" I believe he might have been referring to the economy. The west are mature economies whereas ours are still growing.
4. If your house is 1M and in a year, it's 1.15M is that really "exponential growth" or is that just keeping up with the high frontier inflation? In dollar terms, the increase in property prices isn't as large as he makes it out to be on a longer spectrum.
5. Buy-to-let in Kenya is very consistently holding 5% on current values. Whereas in The west, these metrics hold for a measly 3% net. Pointing to overvaluation on those parts of the world. There are obviously exceptions especially on the foreclosure properties but there luck is more involved than anything else I know for a fact that a two bed apartment in sandton is not ten million rand but more like one million to two million rand. Check www.privateproperty.co.za to see how much much more value you get from buying in SA than Kenya. The real estate in Kenya being over priced is primarily a function of a dysfunctional govt and poor planning. The govt would have built roads,wAter and sanitation facilities in target areas and then invited citizens to buy land lots within them. Given that this is Kenya this won't happen. If the bubble bursts it won't be because of lack of credit but because of a glut (excess supply) and perhaps the inability of renters to afford overpriced rents and of property owners being unable to realize their investment value through renting or selling housing units. The more concerning problem to me is slummification. A large part of the city will be living in slums because the govt can't get its act together and we have already seen this in places like Umoja and the like. The slum evils of violence and such are perhaps the stuff we should be getting more worried about as they thrive under slum like conditions. The govt needs to urgently take on this problem by pending up new areas where people an afford to live in dignity by building infra and inviting residents to buy and develop their homes. Otherwise we are building the seeds for a very unequal society. Lagos has already gone down this route.
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Rank: Elder Joined: 2/26/2012 Posts: 15,980
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Horton wrote:Poorly written article.
1. House prices in the West are "cheap"
that's none sense. He is comparing Commuter areas in London eg Sussex to prices in Westlands, which is more or less, CBD. If we were to compare potatoes to potatoes, then in London, Knighstbridge specifically, a 2Br flat is £1.95M compared to Westlands where a 4br flat is 20-25M with all facilities. In South Africa, Joberg specifically, a 2 Br flat in Sandton, is about 10m rand. If he wants compare commuter areas, he should compare Sussex to Ruiru where a nice 3Br house,is in £300k mark and ruiru is at Kes 6m.
2. What led to the downfall of the housing markets in the west a few years ago was mortgage defaults. In the west, the mortgages given were for upto 20% more than the value of houses ie 120% mortgages. In kenya, we have a big shortage of houses in urban areas and a fraction of 1% in mortgages. The rest are cash buyers.
3. As a comedian once said, " Kenya is in Puberty while the west is on menopause" I believe he might have been referring to the economy. The west are mature economies whereas ours are still growing.
4. If your house is 1M and in a year, it's 1.15M is that really "exponential growth" or is that just keeping up with the high frontier inflation? In dollar terms, the increase in property prices isn't as large as he makes it out to be on a longer spectrum.
5. Buy-to-let in Kenya is very consistently holding 5% on current values. Whereas in The west, these metrics hold for a measly 3% net. Pointing to overvaluation on those parts of the world. There are obviously exceptions especially on the foreclosure properties but there luck is more involved than anything else My thoughts exactly, i even don know where in the US a house is $150K....Oklahoma? Or some really run down neighborhood. I think it would be fair to compare Nrb to Newyork. His views seem to have been picked here on Wazua. Another thing if locals cant afford the houses will that be the same for REITS? People will be renters, smart investors will group buy "There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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@ Mv_ufanisi. I apologize, I meant 4br flat is sandton http://m.property24.com/.../Listing/P24-100972380. The link is for 14.5m rand which equates to kes 123M. Compare that to Westlands 20-30m. So where is the comparison there????? Yes the govt has short comings but we need to stop blaming the govt for everything. Remember what JFK said "ask not what your country can do for you, ask what you can do for your country."
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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mv_ufanisi wrote:Horton wrote:Poorly written article.
1. House prices in the West are "cheap"
that's none sense. He is comparing Commuter areas in London eg Sussex to prices in Westlands, which is more or less, CBD. If we were to compare potatoes to potatoes, then in London, Knighstbridge specifically, a 2Br flat is £1.95M compared to Westlands where a 4br flat is 20-25M with all facilities. In South Africa, Joberg specifically, a 2 Br flat in Sandton, is about 10m rand. If he wants compare commuter areas, he should compare Sussex to Ruiru where a nice 3Br house,is in £300k mark and ruiru is at Kes 6m.
2. What led to the downfall of the housing markets in the west a few years ago was mortgage defaults. In the west, the mortgages given were for upto 20% more than the value of houses ie 120% mortgages. In kenya, we have a big shortage of houses in urban areas and a fraction of 1% in mortgages. The rest are cash buyers.
3. As a comedian once said, " Kenya is in Puberty while the west is on menopause" I believe he might have been referring to the economy. The west are mature economies whereas ours are still growing.
4. If your house is 1M and in a year, it's 1.15M is that really "exponential growth" or is that just keeping up with the high frontier inflation? In dollar terms, the increase in property prices isn't as large as he makes it out to be on a longer spectrum.
5. Buy-to-let in Kenya is very consistently holding 5% on current values. Whereas in The west, these metrics hold for a measly 3% net. Pointing to overvaluation on those parts of the world. There are obviously exceptions especially on the foreclosure properties but there luck is more involved than anything else I know for a fact that a two bed apartment in sandton is not ten million rand but more like one million to two million rand. Check www.privateproperty.co.za to see how much much more value you get from buying in SA than Kenya. The real estate in Kenya being over priced is primarily a function of a dysfunctional govt and poor planning. The govt would have built roads,wAter and sanitation facilities in target areas and then invited citizens to buy land lots within them. Given that this is Kenya this won't happen. If the bubble bursts it won't be because of lack of credit but because of a glut (excess supply) and perhaps the inability of renters to afford overpriced rents and of property owners being unable to realize their investment value through renting or selling housing units. The more concerning problem to me is slummification. A large part of the city will be living in slums because the govt can't get its act together and we have already seen this in places like Umoja and the like. The slum evils of violence and such are perhaps the stuff we should be getting more worried about as they thrive under slum like conditions. The govt needs to urgently take on this problem by pending up new areas where people an afford to live in dignity by building infra and inviting residents to buy and develop their homes. Otherwise we are building the seeds for a very unequal society. Lagos has already gone down this route. @Mv you are spot on.
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Rank: Member Joined: 11/16/2007 Posts: 16
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jamplu wrote:The article has ideas that seems to be picked randomly from different sources doesn't clearly tell us what will lead to the bubble burst. This guy is not telling us about the indicators that shows we are headed to a burst.
But bubble or no bubble property prices are ridiculous in Kenya they must correct at some point. Am yet to really understand the factors we are currently using to value land and houses may be @A4architect anaeza saidia. Take for instance Syokimau and Kitengela soon they will be beyond middle class yet when it rains most leave their cars and walk better still there is no drainage and sewerage services what are we selling??
@ Jamplu, i agree with you. Currently, the prices of property in Kenya are exaggerated beyond explanation. Even with demand vs supply it still doesn't add up. Borrowing power has also contributed immensely and thus, even the ordinary citizen with a decent earning can hardly finance a mortgage leave alone a normal loan given the current interest rates. The banks must be having the 'time of their lives'. I take it that the writer ( a lawyer) is well versed in matters regarding property investment and the real estate. How much would u be worth if you lost all your money?
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Rank: Member Joined: 11/21/2006 Posts: 608 Location: Ruiru
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I read the article... of real concern should be the price of land. A decent piece in places like Ruiru goes for like 3M. And as someone pointed out the lack of planning in the mushrooming neighbourhoods .... any structure is allowed as the Council guys just collect bribes. It's pathetic. I however don't foresee any bubble in Nairobi ... not any soon "..I am because we are. "― Ubuntu, Umtu,
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Rank: Member Joined: 1/15/2010 Posts: 625
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Horton wrote:@ Mv_ufanisi. I apologize, I meant 4br flat is sandton http://m.property24.com/.../Listing/P24-100972380. The link is for 14.5m rand which equates to kes 123M. Compare that to Westlands 20-30m. So where is the comparison there????? Yes the govt has short comings but we need to stop blaming the govt for everything. Remember what JFK said "ask not what your country can do for you, ask what you can do for your country." I happen to be quite knowledgeable about the property market in Sandton and I can tell you that comparing oranges to oranges Kenyan properties are way overpriced and unaffordable. For example an apartment that costs 1.5M (14M kshs) Rand fetches about 12,000 Rand a month in rent and your mortgage requirement upon paying a 20% deposit will be roughly 12,000 Rand a month. That means that its waay easier to graduate from a renter to an owner in SA. My main point about criticizing the govt is that home ownership should be seen as a basic need - not a privilege. Turning over such an important sector of human life over to speculators is almost the same as if the water sector was privatized and water was being sold at outrageous prices. If Kenya is serious about vision 2030, the government must move strongly on home ownership and ensure as many of its citizens as possible are proud home owners. That's what leads to a much more stable, secure, clean and stable society. Communities with low home ownership rates ie. primarily rent based such as Nairobi with 70% plus of the population being renters tend to have much worse outcomes in terms of violence, slums, drugs etc. That's what the govt is allowing to happen by not moving in to ensure that a person with a normal job in Kenya can afford to build a home. If things stay as they are even the so called rich who are profiting from this absurd situation won't be able to enjoy their money in peace.
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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@Mv orite so how is Westlands at 30m mark overpriced compared to sandton at 123m?
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Rank: Member Joined: 4/6/2009 Posts: 78
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Ditto..@MV_ufanisi: Slumification is my biggest worry.Take a look at Southlands,Buru and South B after the extensions and 5 storey flats.They are functional slums...no green areas concrete kiosks as barber shops, chemists etc.
A slump can occur regardless of supply vis a vis demand mismatch.Find out what happened in Dubai some time back or banana island in some african capital
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Rank: Member Joined: 1/15/2010 Posts: 625
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Horton wrote:@Mv orite so how is Westlands at 30m mark overpriced compared to sandton at 123m? The 123m is an exceptional case. It prolly has marble floors, gold plated stuff in there etc. It's an outlier, not the average kind of place in Sandton. It's probably like the most expensive apartment in Sandton. Check out this 3 bedroom apartment going for about 9million Kshs(Not Rand!) in Sandton - http://www.pamgolding.co...ource%3dadvanced-search
You can also go to www.privateproperty.co.za and check out the houses and prices? And make sure to check out the amenities and stuff like that for full comparison. This same apartment in Nairobi would prolly go for like 20 million Kshs and for 1M USD in Ikoyi, Lagos. Everytime I fly into Nairobi and see all the empty land, I wonder why land is so superficially expensive that even average middle class folks e.g. a family of two teachers can't afford a decent home in Nairobi.
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Rank: Veteran Joined: 1/20/2011 Posts: 1,820 Location: Nakuru
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and the slummification phenomenon is not only happening in NBO but also in MSA.... http://www.businessdaily...4/-/nfsdxw/-/index.html
Greed will finish us Dumb money becomes dumb only when it listens to smart money
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Rank: Veteran Joined: 3/25/2010 Posts: 939 Location: Nai
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Nyali looks weird of late. Especially the shree area was just degraded by these apartments. They are poorly designed and are being built haphazardly with no clear guidelines.
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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@ MV that link u sent me is for "Sandton Area" sorta like How there is Muthaiga & new Muthaiga. Sandton city, flats are the prices what I quoted. http://www.pamgolding.co...order%3dpricedescending which is at 7.5m rand for a 3 br. Also the link that u placed on your last post is of a flat in SANDTON AREA and it's only 93sq m. For a 3 br??? That's a joke!! That's 1000sqf!!!!! Reminds me of the tiny 3 br flats that are on sale in mlolongo! We have been talking of a"bubble" since year 2003. It's been over 10 years since, yet none of the doomsday prophets are substantiating their arguments with SOLID facts; just rumors, hearsay and half baked "Professional views".
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