Barriers to home ownership

We started the year with big dreams and equally big plans, but now as we spend our last coins on merry-making, we can’t help but reflect on how we managed our finances. Another year of hard work and still nothing to show for it?

In September this year, the Kenya National Bureau of Statistics reported that cement consumption was up by 18 per cent as 4.97 billion tonnes an indicator that the property and construction industry is growing as savvy investors inject capital into real estate.

But what makes it difficult for many of us to execute our investment plans? Before you make plans to start saving up for your dream home or invest in an income-generating property, here are a few things that could be holding you back:

Infobesity

Research is great until it gets in the way of making an informed choice. The terms information overload and too much information have been around for decades. But they are becoming a real concern in the information and data ages (21st century).

According to Finances Online, tweeps around the world posted an average of 650 million tweets a day in 2022, while email users shared 333.2 billion emails a day. On WhatsApp, 41.7 million messages were exchanged daily while Facebook facilitated the exchange of 150,000 messages and 147,000 images every day. Netflix users streamed over 400,000 hours of content daily while Instagram users posted 347,222 stories.

The amount of content exchanged and consumed on the internet alone in 2022 is so high, that it is measured in zettabytes and these are just a few of the most popular apps. We’ve got more content on Tik Tok, Snapchat, Google, Youtube, Linkedin, Podcasts and other chat apps.

We also have offline media such as billboards, books, radio, newspapers, magazines and TV. It’s an endless pool of content that often leads to information overload also referred to as infobesity. And while it may sound like a harmless syndrome, it presents worrying symptoms such as confusion, lack of productivity at work, anxiety, stress, inability to process information and most importantly, inability to think critically and make decisions.

Too much information is simply an enemy of good decision making and you need that skill to invest. Moving into 2023, we should be intentional in how we consume content. Choose the right sources for investment advice wisely and block the rest. It is also advisable to limit the amount of time we spend on the apps as this will automatically limit the amount of content we are consuming, hence leaving room to process information and make decisions. Every once in a while, consider a social media detox as this will clear your mind and create room for critical thinking and decision-making.

Consumerism

Any real estate investor will tell you that investments are a result of sacrifices. A few years ago, homeowners interviewed for this column shared their homeownership journeys, which were strikingly different, except for one thing; they all had to forego a few luxuries.

Little things, like cutting down on your household budget can go a long way. One of the couples shared that they stopped using their car, just to cut down on the fuel cost and channel their money into mortgage repayments.

In yet another conversation with a homeowner, it emerged that money spent on rent can be an obstacle to homeownership. The homeowner mentioned that when he decided to build a home, he moved into a temporary mabati structure within his compound and channelled all the rent money into constructing his maisonette. In a feature story published in this very column, earlier this year, a tiny homeowner narrated that at 26, she was tired of renting and so she made use of the space she leased for her business to construct a one-bedroom container house. Leaving the rental market gave her an opportunity to channel her resources into her property dreams.

Consumerism can be defined in many ways but one definition is that it is an economic concept that encourages ever-increasing consumption of services and goods as a way to be happy. Does the saying “shopping is cheaper than therapy” sound familiar?

Many businesses tap into and encourage consumerism to keep their sales graphs on an upward trend. The most notorious proponents of consumerism include electronic manufacturers that want you to buy version 2.0 of their brand, even though version 1.0 is still functioning perfectly fine.

Consumerism is further fuelled by social media and the influencer lifestyle. A 2015 report by Deloitte titled; Navigating the New Digital Divide: Capitalizing on Digital Influence in Retail, revealed that consumers’ digital and mobile experiences influenced their in-store purchases and that in 2014, a total of $1.7 trillion in sales were a result of consumers interacting with digital devices.

This was more than seven years ago and as predicted in the report, digital devices were going to play a bigger role in our purchase patterns. Social media sites have improved their cookies and the minute you type the words living room makeover on Pinterest, 30 minutes later you’ll be exposed to countless home decor adverts on Instagram or Facebook, accompanied by home makeover videos from your favourite influencer.

It takes a conscious mind to battle consumerism and stays disciplined at a time like this. As you make plans next year, remember to evaluate your household budget and seal the financial leakages. Purpose to be mindful of your finances and keep your focus on your goals. You may not achieve those goals today or tomorrow, but little efforts count.

Expensive mobile loans

In September this year, it was reported that four million Kenyans would be removed from the Credit Reference Bureau (CRB) listing. This is part of the new government’s plan to reform the credit sector. And true to this, in November, the Central bank of Kenya gave a 50 per cent waiver to the defaulters.

But four million is just a fraction of the millions of Kenyans on the “blacklist”. As a country, we have a credit problem and a CRB listing has been normalised by the masses. But being listed on CRB has its risks. First, you are marked as a defaulter, hence banks will perceive you as a risky borrower with a bad credit score.

Risky borrowers are likely to be subjected to high-interest rates if at all their loan applications are approved. Often real estate developments rely on credit and having a good credit score can save your future project from stalling.

Unfortunately, most of the CRB listings stem from defaulting expensive mobile loans with exorbitantly high-interest rates and zero barriers to access. Some of the most expensive mobile loans charge up to 30 per cent interest rate per month, while others charge 15 per cent or slightly less.

A Sacco loan comes at a one per cent interest rate per month with more flexible payment plans, while a bank loan will cost slightly more than a Sacco loan with equally friendly payment plans. Essentially, expensive credit eats into your finances because you are paying back way more than you borrowed.

In addition, they are addictive and can turn into an endless pit of debt. It is difficult to invest in anything when you are always in debt. Let’s purpose clear debt in 2023, uninstall the lending apps and work on our credit scores moving forward. 

Poor saving culture

When buying a home or a piece of land for future development, every seller will require you to pay a deposit. While acquiring a loan might help you buy what you want, saving is integral to the property ownership journey. And as the year comes to an end, it’s imperative to look into your annual income and your expenditure versus your savings.

Financial experts advise us to save at least 20 per cent of our income. To break it further down, if you made Sh70,000 take home, per month your annual earnings add up to Sh840,000 and ideally, your savings should be Sh170,000 give or take, if you have a healthy saving culture.

With this amount, you can afford the deposit for a piece of land in a good location or save up some more in two or three years and pay the deposit for an apartment. Mathematics is as simple as that. Unfortunately, studies show that Kenyans have a poor saving culture that is below the continent’s projected average of 17 per cent.

This culture is often attributed to a lack of financial literacy and consumerism. In fact, Kenya is home to some of the biggest spenders, as evidenced by multiple luxury brands in various industries setting shop in the country. Developing a strong saving culture requires discipline and commitment.

As we cross over into 2023, there is a simple question to ask yourself: How much do you need as a deposit for your dream property, how much do you have and what will it take for you to save the rest? If you struggled with saving, consider taking up financial literacy classes or engaging experts who train in financial management.

Clear your debts and work on building a consistent saving habit. Conclusively, 2023 will be a wonderful time to invest, as it is still a buyer’s market. We only need to break habits and come up with solid executable plans on how to invest.

Simple questions to ask yourself about failed investment goals:

•  What is your vision when it comes to property ownership?
•  What stands in the way of that vision?
•  How have you self-sabotaged in the past?
•  What bad habits make it difficult for you to invest?
•  Do you have an investment window (limited time frame) and how fast is it closing?
•  What happens if you do not invest now?
•  How much knowledge do you have about the investment you want to pursue?
•  Are there knowledge gaps you need to fill before investing?
• What can you do to improve your current income?
•  Do you need to set boundaries with your dependents in order to achieve your investment dreams?
•  Is fear holding you back?
•  Is there a better time to invest than now?
•  What commitment or changes will you make this new year to achieve your dreams?