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Property bubble bursts
Rank: Elder Joined: 6/23/2009 Posts: 13,517 Location: nairobi
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quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago..
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Member Joined: 9/14/2011 Posts: 834 Location: nairobi
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obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. You could be right. i wonder how bad the oversight by CBK is. Even with the new Governor are banks getting away with mis-reporting?
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Rank: Elder Joined: 6/23/2009 Posts: 13,517 Location: nairobi
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heri wrote:obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. You could be right. i wonder how bad the oversight by CBK is. Even with the new Governor are banks getting away with mis-reporting? The Governor is fault free.. He even called out banks that were underprovisioning, leading to some receiverships.. The good man also exposed liquidity constraints in a number of lenders
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Elder Joined: 12/7/2012 Posts: 11,908
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obiero wrote:heri wrote:obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. You could be right. i wonder how bad the oversight by CBK is. Even with the new Governor are banks getting away with mis-reporting? The Governor is fault free.. He even called out banks that were underprovisioning, leading to some receiverships.. The good man also exposed liquidity constraints in a number of lenders I dont buy into the default in the property segment theory, people got wise on how their source for financing for their investments. Otherwise we would be seeing quite a large number of property auctions, ama what am i missing? In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Elder Joined: 6/23/2009 Posts: 13,517 Location: nairobi
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Angelica _ann wrote:obiero wrote:heri wrote:obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. You could be right. i wonder how bad the oversight by CBK is. Even with the new Governor are banks getting away with mis-reporting? The Governor is fault free.. He even called out banks that were underprovisioning, leading to some receiverships.. The good man also exposed liquidity constraints in a number of lenders I dont buy into the default in the property segment theory, people got wise on how their source for financing for their investments. Otherwise we would be seeing quite a large number of property auctions, ama what am i missing? I think most of the properties in middle class rentals segment belong to the illegal proceeds of criminal activity hence lacking a tenant even for a year or three doesn't warrant an auction since the property is full paid up!!
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Veteran Joined: 7/3/2007 Posts: 1,634
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obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. This bubble has been bursting since 2010? "The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
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Rank: Veteran Joined: 11/13/2015 Posts: 1,590
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quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Short everything real estate like the market has been doing it for a while HF,Britam, centum, Fahari I-reit, D-reit.
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. You are almost there, banks are indeed stuck with loans to incomplete projects or loans to complete but unsold/unoccupied houses. I see a progressive move by developers to quality housing, I do believe developers who go for high end finishing and styling of their units (and may be calling them condo's NOT apartments  ) will likely continue getting a market among the HNWI who happen to be very many in Kenya, thanks to illegal proceeds from all manner of corrupt deals we see around every day. "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Veteran Joined: 7/5/2010 Posts: 2,061 Location: Nairobi
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Wakanyugi wrote:obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. This bubble has been bursting since 2010? It doesn't burst, but there is no correction either. How? It is mind-boggling. The values booked are not the same as real value. It is artificial. We have loans underwriting overvalued assets. For instance, if you develop a house using 10 million (land+construction costs),..then you slap a 20 million price tag, doesn't mean someone will pay you that 20 million, probably not even the 10 million you used .. if you consider an extreme case (suppose you built on a site based on future plans that a tarmacked road will be constructed just 200 meters upstream ..then the government changed its mind and moved the road 15kms away  ) may be the best you can get is 7m for the house. Now if it was financed, may be the bank books it as a 10 million with projected interest earning less administration costs at a minimum; if there is a default perhaps it books it as a reclaimed asset of 20 million or close- as deluded as the original owner. It is a simplistic model but I think it is an apt representation of how to build a house of cards. This is where CBK is failing us. CBK does not stress test Kenyan banks, doesn't audit the asset side of the balance sheet to get true valuations. Banks are getting away with putting whimsical figures here without challenge, "restructuring" loans time and time again -it is time CBK stepped in, did a few audits and told the banks 'hey, these billions you have declared here are nonsense, this is not the true value'. If banks contest then a simple blind market test can be executed - economics by blunt instrument ala rate cap  . Loans should have minimum thresholds -after which they become bad debts, period! ...Wake up one fine morning and tell Bank X to deposit 8.7 billion with CBK within 24 hours for a 2-week (adjustable) safe keeping. Common sense measures like this and the true picture of P/Ls across Kenya starts to show. Just write a law that states if an institution (especially a listed one) is suspected (after a preliminary audit, obviously ) of misreporting, overstating assets and understating debts, it will invite a comprehensive, independent audit at the institution's cost,..and then for CBK to develop a healthy skepticism and rabid suspicion of banks...they would straighten out immediately. No one would hang on to overpriced, toxic assets and real estate would start to correct somehow ... Just thinking out loud. I hate banks.
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Rank: Elder Joined: 6/23/2009 Posts: 13,517 Location: nairobi
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quicksand wrote:Wakanyugi wrote:obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. This bubble has been bursting since 2010? It doesn't burst, but there is no correction either. How? It is mind-boggling. The values booked are not the same as real value. It is artificial. We have loans underwriting overvalued assets. For instance, if you develop a house using 10 million (land+construction costs),..then you slap a 20 million price tag, doesn't mean someone will pay you that 20 million, probably not even the 10 million you used .. if you consider an extreme case (suppose you built on a site based on future plans that a tarmacked road will be constructed just 200 meters upstream ..then the government changed its mind and moved the road 15kms away ) may be the best you can get is 7m for the house. Now if it was financed, may be the bank books it as a 10 million with projected interest earning less administration costs at a minimum; if there is a default perhaps it books it as a reclaimed asset of 20 million or close- as deluded as the original owner. It is a simplistic model but I think it is an apt representation of how to build a house of cards. This is where CBK is failing us. CBK does not stress test Kenyan banks, doesn't audit the asset side of the balance sheet to get true valuations. Banks are getting away with putting whimsical figures here without challenge, "restructuring" loans time and time again -it is time CBK stepped in, did a few audits and told the banks 'hey, these billions you have declared here are nonsense, this is not the true value'. If banks contest then a simple blind market test can be executed - economics by blunt instrument ala rate cap . Loans should have minimum thresholds -after which they become bad debts, period! ...Wake up one fine morning and tell Bank X to deposit 8.7 billion with CBK within 24 hours for a 2-week (adjustable) safe keeping. Common sense measures like this and the true picture of P/Ls across Kenya starts to show. Just write a law that states if an institution (especially a listed one) is suspected (after a preliminary audit, obviously ) of misreporting, overstating assets and understating debts, it will invite a comprehensive, independent audit at the institution's cost,..and then for CBK to develop a healthy skepticism and rabid suspicion of banks...they would straighten out immediately. No one would hang on to overpriced, toxic assets and real estate would start to correct somehow ... Just thinking out loud. I hate banks. This is probably the most sensible post I have read here today. I hate banks too
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Member Joined: 12/1/2007 Posts: 539 Location: Nakuru
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quicksand wrote:Wakanyugi wrote:obiero wrote:quicksand wrote:Magunia wrote:Allow me to chime in According to an article by Duncan Miriri "there were less than 25,000 mortgages in Kenya and mortgage debt made up just 3.15 percent of the GDP in 2015." Those saying that there will be a real estate bubble burst are mistaken. In Kenya the banks protect themselves very well. The only way rent prices will go down is by oversupply of homes by the government. That is not going to happen because of the ppp thing http://www.reuters.com/a...worldbank-idUSL9N13C01R
I am convinced there is creative accounting and mis-reporting going on at banks. Some of them should be quite distressed. There must be a lot of capital tied up in half-finished projects or in projects completed but with no occupancy or buyers, which means the owners are not servicing loans. These loans should be in bad debt / write-down territory now, fire sale mode. But no, everyone remains stiff lipped, probably hoping things will turn around, the turds in the books remain hidden somehow cause the fundamentals don't appear badly off, it is all hunky-dory. What if there is no turn-around in the next 5 to 10 years? How bad are the books I wonder? Will it be another Nakumatt-like scenario, a shiny edifice that is hollow inside? Our economy fell seriously ill exactly 4 years ago.. This bubble has been bursting since 2010? It doesn't burst, but there is no correction either. How? It is mind-boggling. The values booked are not the same as real value. It is artificial. We have loans underwriting overvalued assets. For instance, if you develop a house using 10 million (land+construction costs),..then you slap a 20 million price tag, doesn't mean someone will pay you that 20 million, probably not even the 10 million you used .. if you consider an extreme case (suppose you built on a site based on future plans that a tarmacked road will be constructed just 200 meters upstream ..then the government changed its mind and moved the road 15kms away ) may be the best you can get is 7m for the house. Now if it was financed, may be the bank books it as a 10 million with projected interest earning less administration costs at a minimum; if there is a default perhaps it books it as a reclaimed asset of 20 million or close- as deluded as the original owner. It is a simplistic model but I think it is an apt representation of how to build a house of cards. This is where CBK is failing us. CBK does not stress test Kenyan banks, doesn't audit the asset side of the balance sheet to get true valuations. Banks are getting away with putting whimsical figures here without challenge, "restructuring" loans time and time again -it is time CBK stepped in, did a few audits and told the banks 'hey, these billions you have declared here are nonsense, this is not the true value'. If banks contest then a simple blind market test can be executed - economics by blunt instrument ala rate cap . Loans should have minimum thresholds -after which they become bad debts, period! ...Wake up one fine morning and tell Bank X to deposit 8.7 billion with CBK within 24 hours for a 2-week (adjustable) safe keeping. Common sense measures like this and the true picture of P/Ls across Kenya starts to show. Just write a law that states if an institution (especially a listed one) is suspected (after a preliminary audit, obviously ) of misreporting, overstating assets and understating debts, it will invite a comprehensive, independent audit at the institution's cost,..and then for CBK to develop a healthy skepticism and rabid suspicion of banks...they would straighten out immediately. No one would hang on to overpriced, toxic assets and real estate would start to correct somehow ... Just thinking out loud. I hate banks. Wow, simplified very well for lay people like me For investors as a whole, returns decrease as motion increases ~ WB
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