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Stocks vs Buying a house - A tale of two kenyans
Rank: Elder Joined: 7/22/2009 Posts: 7,460
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VituVingiSana wrote:DBLyon wrote:Horton wrote:This story is too skewed to favour stocks
1. It assumes an extremely modest growth of 6.5% pa in the price of the apartment.
2. Shows that the apartment is currently yielding only 3% which part of nairobi is yielding this low?
As an example, a property I bought 4 years ago on mortgage from stanchart. Mortgage is at 10.9%, the property has doubled in value and it is now fetching an 11% yield. Therefore rent adequately covers mortgage. And you cant beat double value in 4 years. Agreed. I also think that a mortgage is not all bad if you are financially savvy. Especially if you get the right rate like 10.9% from Stanchart. A property I bought against many people's advice has literally tripled in value in 7 years. The rent pays the mortgage. The rent in that period has also increased significantly by 50%. And I have been able to take small loans against the increased value to do other things. A house is the easiest thing to use as security, at least in this country. Back then...In July 2016 Where can one get a mortgage at 11%? GoK is paying 13% on risk-free bonds. Which bank will lend at anything lower than 13%? After the price increase 2x for @Horton over 4 years and 3x for @DB in 7 years... will the trend continue? @vvs - I remember a discussion here some time back where it was revealed that some banks are giving loans on NONE REDUCING BALANCE and quote a lower rate like 11%. This means that if you take a loan for 10 million, you will be paying an interest on 10 million for 20 years!!! Someone was kind enough to calculate (convert) the effective rate on (to) a reducing balance and it was coming to a ridiculous rate!!!! Your question is extremely valid!! Why would any sane person give you a loan at an interest rate of 11% while they can get 13% with much lower risk and cost/time (valuation bla bla bla). Such rates can only be given by am employer as a benefit or to tie you up to the company. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Member Joined: 5/30/2016 Posts: 332 Location: Kayole
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VituVingiSana wrote:kiash wrote:Had not read the post but all in all Kenyan banks scr**w people big time. Apart from charges while accessing your monies , the intrest rates are so high.I will not even complain coz if i were to go to a bank hapa majuu and ask for the same amount in loan i would get an interest rate of kitu 2.5% .I would end up paying about 18 M at the end of 20 yrs while a kenyan will pay more than 36 M more than 20 M in interest peke yake. There are even countries at the moment like Sweden that have -ve interest rates, sijui kama watakuongeza pesa ukiomba  One of the reasons given by Kenyan banks is the job security , but do civil servants enjoy less rates? No wonder billions in profits is the norm. Your government aka GoK is paying the banks a risk-free 13%. Why would a bank lend to you at anything less than 13%? Interest rates are -ve in Sweden if you lend to the government not -ve for borrowers. Until GoK curbs spending significantly more than it collects in taxes do not expect lower interest rates. Opposition should push for laws that places caps on government spending and the likes not wasting time sitting on the tarmac and protesting KEGN, KPLC, KQ, SCOM
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Rank: Elder Joined: 7/22/2009 Posts: 7,460
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mkate_nusu wrote:VituVingiSana wrote:kiash wrote:Had not read the post but all in all Kenyan banks scr**w people big time. Apart from charges while accessing your monies , the intrest rates are so high.I will not even complain coz if i were to go to a bank hapa majuu and ask for the same amount in loan i would get an interest rate of kitu 2.5% .I would end up paying about 18 M at the end of 20 yrs while a kenyan will pay more than 36 M more than 20 M in interest peke yake. There are even countries at the moment like Sweden that have -ve interest rates, sijui kama watakuongeza pesa ukiomba One of the reasons given by Kenyan banks is the job security , but do civil servants enjoy less rates? No wonder billions in profits is the norm. Your government aka GoK is paying the banks a risk-free 13%. Why would a bank lend to you at anything less than 13%? Interest rates are -ve in Sweden if you lend to the government not -ve for borrowers. Until GoK curbs spending significantly more than it collects in taxes do not expect lower interest rates. Opposition should push for laws that places caps on government spending and the likes not wasting time sitting on the tarmac and protesting  Opposition??? I once asked why the opposition were not doing more to fight corruption and I was told I was very optimistic to expect the opposition to do anything meaningful. And guess what, that was true. Reality: Messed up government, even more messed up opposition!!! Wanakula pamoja. Na si kwa macho!!! We are by ourselves and we have to decide what to do about it!!! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: User Joined: 1/20/2014 Posts: 3,528
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MaichBlack wrote:mkate_nusu wrote:VituVingiSana wrote:kiash wrote:Had not read the post but all in all Kenyan banks scr**w people big time. Apart from charges while accessing your monies , the intrest rates are so high.I will not even complain coz if i were to go to a bank hapa majuu and ask for the same amount in loan i would get an interest rate of kitu 2.5% .I would end up paying about 18 M at the end of 20 yrs while a kenyan will pay more than 36 M more than 20 M in interest peke yake. There are even countries at the moment like Sweden that have -ve interest rates, sijui kama watakuongeza pesa ukiomba One of the reasons given by Kenyan banks is the job security , but do civil servants enjoy less rates? No wonder billions in profits is the norm. Your government aka GoK is paying the banks a risk-free 13%. Why would a bank lend to you at anything less than 13%? Interest rates are -ve in Sweden if you lend to the government not -ve for borrowers. Until GoK curbs spending significantly more than it collects in taxes do not expect lower interest rates. Opposition should push for laws that places caps on government spending and the likes not wasting time sitting on the tarmac and protesting Opposition??? I once asked why the opposition were not doing more to fight corruption and I was told I was very optimistic to expect the opposition to do anything meaningful. And guess what, that was true. Reality: Messed up government, even more messed up opposition!!! Wanakula pamoja. Na si kwa macho!!! We are by ourselves and we have to decide what to do about it!!! If opposition was to try (and anybody for that matter) to curtail government spending, that will a good excuse for poor performance and eating by the gava. they will say, they wanted to do, but ......... Let us live with our choices !!!!! Not that there are any better leaders out there to elect!!!! Formal education will make you a living. Self-education will make you a fortune - Jim Rohn.
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Rank: Member Joined: 5/28/2014 Posts: 149 Location: Nairobi
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VituVingiSana wrote:DBLyon wrote:Horton wrote:This story is too skewed to favour stocks
1. It assumes an extremely modest growth of 6.5% pa in the price of the apartment.
2. Shows that the apartment is currently yielding only 3% which part of nairobi is yielding this low?
As an example, a property I bought 4 years ago on mortgage from stanchart. Mortgage is at 10.9%, the property has doubled in value and it is now fetching an 11% yield. Therefore rent adequately covers mortgage. And you cant beat double value in 4 years. Agreed. I also think that a mortgage is not all bad if you are financially savvy. Especially if you get the right rate like 10.9% from Stanchart. A property I bought against many people's advice has literally tripled in value in 7 years. The rent pays the mortgage. The rent in that period has also increased significantly by 50%. And I have been able to take small loans against the increased value to do other things. A house is the easiest thing to use as security, at least in this country. Back then...In July 2016 Where can one get a mortgage at 11%? GoK is paying 13% on risk-free bonds. Which bank will lend at anything lower than 13%? After the price increase 2x for @Horton over 4 years and 3x for @DB in 7 years... will the trend continue? @VVS, Certainly, the rates are high now. The best commercial mortgage rate is still Stanchart at 14.9%. I still maintain that for a finsavvy person it still works. To hold down the price as you make money elsewhere aggressively to pay down the debt. Offplan buys etc. The parents were paying a mortgage at twice the amount of rent the neighbours were paying back in the day. By the time I grew up the mortgage instalments were a fraction of the neighbours' rent. One sixth, approximately. Not to mention the value if one was to sell. Clearly I'm a believer. When you live for others' opinions, you are dead.
- Carlos Slim Helu
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Rank: Elder Joined: 7/22/2009 Posts: 7,460
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Othelo wrote:MaichBlack wrote:mkate_nusu wrote:VituVingiSana wrote:kiash wrote:Had not read the post but all in all Kenyan banks scr**w people big time. Apart from charges while accessing your monies , the intrest rates are so high.I will not even complain coz if i were to go to a bank hapa majuu and ask for the same amount in loan i would get an interest rate of kitu 2.5% .I would end up paying about 18 M at the end of 20 yrs while a kenyan will pay more than 36 M more than 20 M in interest peke yake. There are even countries at the moment like Sweden that have -ve interest rates, sijui kama watakuongeza pesa ukiomba One of the reasons given by Kenyan banks is the job security , but do civil servants enjoy less rates? No wonder billions in profits is the norm. Your government aka GoK is paying the banks a risk-free 13%. Why would a bank lend to you at anything less than 13%? Interest rates are -ve in Sweden if you lend to the government not -ve for borrowers. Until GoK curbs spending significantly more than it collects in taxes do not expect lower interest rates. Opposition should push for laws that places caps on government spending and the likes not wasting time sitting on the tarmac and protesting Opposition??? I once asked why the opposition were not doing more to fight corruption and I was told I was very optimistic to expect the opposition to do anything meaningful. And guess what, that was true. Reality: Messed up government, even more messed up opposition!!! Wanakula pamoja. Na si kwa macho!!! We are by ourselves and we have to decide what to do about it!!! If opposition was to try (and anybody for that matter) to curtail government spending, that will a good excuse for poor performance and eating by the gava. they will say, they wanted to do, but ......... Let us live with our choices !!!!! Not that there are any better leaders out there to elect!!!! Sad but very true @Othelo. If you look at the "floating" politicians - the usual suspects (government and opposition), we have no hope. The guys who will be in government and opposition after next elections are the same characters. They might change the side they sit in parliament but nyani ni wale wale! And Kenyans are allergic to new blood/outsiders. They will not elect a clean and successful business leader, intellectual etc. They will not touch even the relatively acceptable politicians. I would love to see a Muhisa Kituyi, Raphael Tuju/Peter Kenneth ticket for example. But Kenyans would still prefer to recycle the same fellows. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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MaichBlack wrote:VituVingiSana wrote:DBLyon wrote:Horton wrote:This story is too skewed to favour stocks
1. It assumes an extremely modest growth of 6.5% pa in the price of the apartment.
2. Shows that the apartment is currently yielding only 3% which part of nairobi is yielding this low?
As an example, a property I bought 4 years ago on mortgage from stanchart. Mortgage is at 10.9%, the property has doubled in value and it is now fetching an 11% yield. Therefore rent adequately covers mortgage. And you cant beat double value in 4 years. Agreed. I also think that a mortgage is not all bad if you are financially savvy. Especially if you get the right rate like 10.9% from Stanchart. A property I bought against many people's advice has literally tripled in value in 7 years. The rent pays the mortgage. The rent in that period has also increased significantly by 50%. And I have been able to take small loans against the increased value to do other things. A house is the easiest thing to use as security, at least in this country. Back then...In July 2016 Where can one get a mortgage at 11%? GoK is paying 13% on risk-free bonds. Which bank will lend at anything lower than 13%? After the price increase 2x for @Horton over 4 years and 3x for @DB in 7 years... will the trend continue? @vvs - I remember a discussion here some time back where it was revealed that some banks are giving loans on NONE REDUCING BALANCE and quote a lower rate like 11%. This means that if you take a loan for 10 million, you will be paying an interest on 10 million for 20 years!!! Someone was kind enough to calculate (convert) the effective rate on (to) a reducing balance and it was coming to a ridiculous rate!!!! Your question is extremely valid!! Why would any sane person give you a loan at an interest rate of 11% while they can get 13% with much lower risk and cost/time (valuation bla bla bla). Such rates can only be given by am employer as a benefit or to tie you up to the company. I am told by a reliable source that Stanchart is currently offering mortgages at 10.9% i havent checked for meself but i hear its only to priority(or is it premier clients?? Sijafika hapo 😳)
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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But then again...hey real estate bubble....the bubble is going to burst very soon(someone said from year 2000 and counting......)
Please dont get into this messy mbambo 👹👹👹👹👹
The mbanks are evo 😅
PS-we need tenants too 🤓🤓🤓🤓
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Rank: Veteran Joined: 9/18/2014 Posts: 1,127
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VituVingiSana wrote:kiash wrote:Had not read the post but all in all Kenyan banks scr**w people big time. Apart from charges while accessing your monies , the intrest rates are so high.I will not even complain coz if i were to go to a bank hapa majuu and ask for the same amount in loan i would get an interest rate of kitu 2.5% .I would end up paying about 18 M at the end of 20 yrs while a kenyan will pay more than 36 M more than 20 M in interest peke yake. There are even countries at the moment like Sweden that have -ve interest rates, sijui kama watakuongeza pesa ukiomba One of the reasons given by Kenyan banks is the job security , but do civil servants enjoy less rates? No wonder billions in profits is the norm. Your government aka GoK is paying the banks a risk-free 13%. Why would a bank lend to you at anything less than 13%? Interest rates are -ve in Sweden if you lend to the government not -ve for borrowers. Until GoK curbs spending significantly more than it collects in taxes do not expect lower interest rates. Indeed. I find investors in this forum overly fixated on what's happening/going to happen in the political arena before, during and after the elections. Those events are difficult to predict and strategizing in and around them is misguided in my opinion. It's good to keep an eye on it but it can easily paralyze one's decision-making if undue importance is attached to it. Save for fiscal indiscipline which is almost a sure bet the rest is akin to a toss up. It may flip either way. What I think is more crucial/worth paying attention to is the worsening macros locally. If the current trend keeps up, the bear run will extend for quite a while irrespective of how other events unfold. Sentiment/emotions eventually do price in the reality however long it takes. The main purpose of the stock market is to make fools of as many people as possible.
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Rank: Elder Joined: 2/26/2012 Posts: 15,980
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lochaz-index wrote:VituVingiSana wrote:kiash wrote:Had not read the post but all in all Kenyan banks scr**w people big time. Apart from charges while accessing your monies , the intrest rates are so high.I will not even complain coz if i were to go to a bank hapa majuu and ask for the same amount in loan i would get an interest rate of kitu 2.5% .I would end up paying about 18 M at the end of 20 yrs while a kenyan will pay more than 36 M more than 20 M in interest peke yake. There are even countries at the moment like Sweden that have -ve interest rates, sijui kama watakuongeza pesa ukiomba One of the reasons given by Kenyan banks is the job security , but do civil servants enjoy less rates? No wonder billions in profits is the norm. Your government aka GoK is paying the banks a risk-free 13%. Why would a bank lend to you at anything less than 13%? Interest rates are -ve in Sweden if you lend to the government not -ve for borrowers. Until GoK curbs spending significantly more than it collects in taxes do not expect lower interest rates. Indeed. I find investors in this forum overly fixated on what's happening/going to happen in the political arena before, during and after the elections. Those events are difficult to predict and strategizing in and around them is misguided in my opinion. It's good to keep an eye on it but it can easily paralyze one's decision-making if undue importance is attached to it. Save for fiscal indiscipline which is almost a sure bet the rest is akin to a toss up. It may flip either way. What I think is more crucial/worth paying attention to is the worsening macros locally. If the current trend keeps up, the bear run will extend for quite a while irrespective of how other events unfold. Sentiment/emotions eventually do price in the reality however long it takes. If there is anything you will get out of Wazua today, let this post be it. Many are losing focus "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: Member Joined: 1/22/2015 Posts: 682
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Back to the original question. One very important thing is that the hypothetical situations didn't take into account the very important vagaries of life. In my years, I've learnt the rosiest of predictions can be scuttled by all manner of shock occurences. Which of the two routes allows for quick redirection of cash if life decides to present one of it's unpleasant surprises in your face? The stocks route without a doubt. If you want to lock yourself into usurious debt to our banks for the next 20 years of your life, with an illiquid asset, you better hope that God is with you bega kwa bega, uso kwa uso, for the whole period.
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Rank: Chief Joined: 1/3/2007 Posts: 18,121 Location: Nairobi
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DBLyon wrote:VituVingiSana wrote:DBLyon wrote:Horton wrote:This story is too skewed to favour stocks
1. It assumes an extremely modest growth of 6.5% pa in the price of the apartment.
2. Shows that the apartment is currently yielding only 3% which part of nairobi is yielding this low?
As an example, a property I bought 4 years ago on mortgage from stanchart. Mortgage is at 10.9%, the property has doubled in value and it is now fetching an 11% yield. Therefore rent adequately covers mortgage. And you cant beat double value in 4 years. Agreed. I also think that a mortgage is not all bad if you are financially savvy. Especially if you get the right rate like 10.9% from Stanchart. The conditions were onerous for many Kenyans. Employment (salary) not business (business income). Limited amount was available for on-lending. Overall, I am not sure how much Stanchart gave out in mortgages. It did increase Stanchart's profile as a retail bank willing to lend to individuals.
A property I bought against many people's advice has literally tripled in value in 7 years. The rent pays the mortgage. The rent in that period has also increased significantly by 50%. And I have been able to take small loans against the increased value to do other things. A house is the easiest thing to use as security, at least in this country. Back then...In July 2016 Where can one get a mortgage at 11%? GoK is paying 13% on risk-free bonds. Which bank will lend at anything lower than 13%? After the price increase 2x for @Horton over 4 years and 3x for @DB in 7 years... will the trend continue? @VVS, Certainly, the rates are high now. The best commercial mortgage rate is still Stanchart at 14.9%.
Is it still available? What are the T&Cs?I still maintain that for a finsavvy person it still works. To hold down the price as you make money elsewhere aggressively to pay down the debt. Offplan buys etc. https://www.sc.com/ke/borrow/mortgages.html
As low as 14.9% which means the minimum of 14.9% but most would not get that. Once Oigara said KCB gives loans at 10%, when GoK was paying 14% on risk-free T-Bonds, Oigara glossed over was if these loans were subsidized by employers, DFIDs, in KES or USD, conditions that many would not meet, duration, commitment fees, etc The parents were paying a mortgage at twice the amount of rent the neighbours were paying back in the day. By the time I grew up the mortgage instalments were a fraction of the neighbours' rent. One sixth, approximately. Not to mention the value if one was to sell. Clearly I'm a believer. Is that in Kenya? In some countries eg USA one can lock in interest rates for upto 30 years. After the 'goldenberg' era when GoK paid upto 80% pa, most banks stopped long-term fixed-rate loans. I could be wrong... Which banks offer long-term fixed rate [so 12% is 12% even after 5 years even if GoK was borrowing at 4% and now paying 13%]? Some banks give their employees loans at 6% while GoK has 3% loans. These are not for the rest of us. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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