High-earning youth buy cars now and work towards owning big homes. PHOTO | FILE
What you need to know:
To buy a bedsitter or not
Why you should buy It is a good rental asset for those who want to be landlords. You can buy more than one house to collect sizeable rental income. If located in prime areas where value will always go up, bedsitters can be worthwhile investments. You can buy now, sell it later, top up and purchase the dream home.
Why you should not It is an investment for convenience of time after which one outgrows it after marriage and having children.
As housing demand rises, developers have adopted a popular approach to attract young homeowners; building affordable bachelor or bachelorette pads. For developers, owning a cheap, small house at a young age outweighs the extras like space and location, so they thought.
But well-paid young bachelors and spinsters are not interested in the small, cube-like homes with numerous creative space-saving features. Their dreams are fixed on big, spacious homes in leafy suburbs. While two-bedroom and one-bedroom apartments are proving to be an easy sale to young buyers, developers are finding it hard to sell studio apartments and bedsitters in Nairobi.
Acorn, Suraya and Urithi Housing Corporative Society are some of the developers focusing on affordable housing for a growing population of the working young.
Urithi Sacco set aside Sh40 million to build bedsitters in Juja for young, unmarried professionals, but few young buyers showed interest. The sacco changed its marketing strategy and is now selling the houses to older buyers who are renting them out.
“The youth have other priorities. For most, it seems the urgency is to own a car before buying a house, though a few are willing to invest,” said Wallace Mwangi of Urithi.
Sh650,000 house
Urithi is constructing 369 units. It priced the houses at Sh495,000 per unit with buyers paying Sh145,000 deposit and the rest payable in 12 months. But few young buyers responded, forcing the sacco to sell the homes to older investors.
Mr Mwaura says this move has paid off because the units are now 90 per cent sold.
“The irony is that the aged are the ones buying the units with the goal of renting them out to young people,” he said.
Urithi is now selling the units at Sh650,000 with a cash deposit of Sh400,000 and the balance payable in three months.
While developers think the youth have misplaced priorities, young bachelors and bachelorettes are laughing off the idea of buying an 11.5 feet by 15 feet room. Most don’t see the need of buying a small house and later having to make the same investment by buying a three-bedroom family home.
To them a car is more of a necessity than a luxury. But are young people really making unwise investment decisions? Investment advisor Renaldo D’Souza says it is not a case of misplaced priorities.
“If you look at a car, they consider it first because is an affordable investment. It’s easier to secure a car loan than a mortgage. A car is also an easy transferrable asset,” he says.
Mr D’Souza adds that lifestyle changes and the growing demand for lavish goods is another reason why youth overlook investments such as bedsitters.
The rental yields of Sh6,000 to Sh15,000 a month depending on the location of the house are also not attractive and not wise for a young investor looking to make handsome returns.
A person buying a bedsitter for Sh650,000 will recoup the investment in nine years if they charge a monthly rental income of Sh6,000, inflation remains below 10 per cent, the interest rate endures at present level and rent goes up by five per cent each year.
Unwise decisions
“Nine years is a long time. I can’t consider such an investment because it will take me longer to take any profit,” said Owuor Omondi, a 35-year-old who took a mortgage to buy a maisonette at Sh4.5 million in Nairobi’s outskirts.
Kenya has a population of 14 million aged between 21 to 35.
“We are targeting this market,” said Edwin Kirathe, founder and chief executive of Acorn.
Acorn is investing in bedsitter on Jogoo Road, targeting a rental income of Sh20,000 per unit. However, Mr D’Souza advises youth to invest in land.
“You can either buy it for speculation purposes or choose to develop the land at some point. But whichever the case, it is value on investment and you can never go wrong,” the investment adviser says.
