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The Mortgage Company,
The Greenhouse, 2nd Floor
Adams Arcade, Ngong Road
P.O. Box 29310-00100, Nairobi

Tel: +254 729 933955, +254 737 933955
Email: info@tmcafrica.com
www.tmcafrica.com
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Speech by Caroline Kariuki,Managing director of Mortgage Company on mortgage report in kenya

Caroline Kariuki, Managing Director,
The Mortgage Company

Thank you, Farhana, Ladies, Gentlemen, and members of the press, for your time and interest today in this second mortgage industry report. There can be few industries quite as relieved as the mortgage industry by last week's news of a final easing in the CBK base rate.

For those of us in the industry, we see home loans as an entry point to asset ownership that is more than a life-time repositioning. Homes, once fully owned, pass on to future generations, representing a permanent change in a family's wealth and costs. However, a mortgage is a long journey, and it is vital that every buyer who signs up for a home loan is positioned to achieve the best possible value and the best possible returns.

Mortgage buyers often pay substantially more month by month than renters, but even at the recent interest rate peaks, normally end up millions of shillings ahead of their renting counterparts. That gain is now set to increase sharply, in an environment of rising rents, and falling interest rates.

That said, for many landlords already locked in at lower rental incomes, and after more than two years of only negligible gains in house prices, the last three quarters have brought lower returns in rent and capital appreciation than the cost of mortgage finance. But we now see that this has been almost an isolated case of such net losses across the previous decade. With rates now falling, rents rising, and house prices set to rise, we forecast a progressive closing in this gap from here, and a return to positive gains for landlords too.

At the same time, for new entrants into the housing market, the last quarter has seen a downwards trend in mortgage costs, with StanChart moving to offer a rate of 16.9 per cent on mortgage takeovers with established credit history, CFC Stanbic cutting its fixed rate to 18.5 per cent, and the volume of non-bank mortgages expanding, at rates of around 14 per cent. Microfinance institutions are also now moving into home loans, although principally for land plots.

We have additionally presented the rates for the leading mortgage lenders, with a spread at the end of June between the most expensive mortgages, from Equity Bank and CFC Stanbic at 24 per cent, to the cheapest, from I&M Bank at 18 per cent, of a full
6 percentile points. In financial terms, the cheapest of these mortgages demands 24 per cent less in payments than the most expensive. This is important.

We have also calculated this time the payments needed to save a deposit and access a mortgage for properties from land plots to stand alone houses. On this basis, we calculate, for example, that saving Sh17,200 a month for five years is enough to access a Sh6m first home.

As it is, Kenya remains a property market where the majority of purchasing is done in cash by buyers wealthy enough to be able to hand over the asking price in one payment.

But, globally, home ownership has become the norm thanks most substantially to the mortgage industry, which enables salary earners to access homes, covering the rental and additionally accumulating an asset that moves into the family for generations. Worldwide, mortgages have served to transform the working classes into classes with assets and wealth. For mortgage brokers such as ourselves, we are always searching for the best mortgage deal for every buyer, and passionately believe in the long- term repositioning of individual families that our industry delivers.

But with every purchase there is the opportunity to get the very best deal available, and the risk of paying far more, and we do believe it is vital to familiarize every potential buyer with the terms on offer, and the returns each and every deal represents for them in the long term.

On which note, we should like to open for your questions, and take the chance, once again, to thank you all for your time and interest in joining us today.

Article source: http://www.webaraza.com/webaraza2/component/acymailing/archive/view/listid-1-get-pr-alert-on-your-desk-top/mailid-256-speech-by-caroline-kariukimanaging-director-of-morgage-company-on-morgage-report-in-kenya

 
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Did you know

Housing market activity rebounds on CBK rate cuts

back to life

  • Rent price rises in quarter four 2012 far greater than sales price rises
  • Asking rents rose by 4.1 per cent in the final quarter of 2012, over the previous quarter, with steepest rises at top of the market for standalone properties
  • Asking sales prices rose by 1.7 per cent, much more slowly than in the third quarter of 2012
  • Both renting and sales activity rose sharply, however, after a profound drop in the middle of last year, with viewings by purchasers rising to levels approaching the first half of 2011, before the interest rate hikes

 

Annual Index Highlights:

HassConsult today unveiled the Hass Property Index results for the final quarter of 2012, showing a sharp upswing in viewing and enquiries, but still relatively flat sales pricing - although rental prices continued to rise steeply across all segments of the market.

“The sensitivity of buyers to interest rates, even in a largely unmortgaged market, has shown up very sharply in sales activity and pricing in the last 18 months,” said Sakina Hassanali, Head of Research and Marketing at HassConsult. “With rates slashed, enquiries returned to much the same levels of early 2011.”

However, sales prices are taking somewhat longer to gain momentum. Pushes for higher sales prices in quarter three achieved little real gains, seeing asking prices remain largely static in the final quarter.

But asking prices for rentals continued to climb strongly. With asking rents rising by an overall 4.1 per cent, the biggest rises came at the top of the market, where rents for standalone properties rose by 5.2 per cent on the previous three months, making for a 17. 2 per cent increase from January to December 2012.

“The upwards correction in rents, as buyers have held off for better financing terms, has been particularly strong after the relatively flat rentals market in the preceding two years, and may yet take some months to level out,” said Ms Hassanali.

Even the previously stagnant apartment rental market recorded further rises in asking prices, up 2.1 per cent on quarter 3 and 15 per cent on the final quarter of 2012.

“Overall, the picture is of a market returning to buoyancy,” she said.

“Rental yields are now stronger, following the year of rental rises, and financing is moving into a steadily more affordable range. This combination augurs well for a strong year in real estate in 2013, based on financial fundamentals and despite all the uncertainty that comes with an election year.”


For more information, please contact:
Sakina Hassanali - Head of Marketing & Research
HassConsult Ltd
ABC Place, Westlands
Tel: +254 020 4446914

 

 

SNAP SHOTS:

  • Stand Alone houses include houses, bungalows, cottages and villas either on their own plot or in a gated community.
  • Property values for stand alone houses have increased by 3.92 times since 2001, a 2.3% rise in the last quarter and a 11.7% rise in the last year. The average price for a stand alone house is currently 34.5 million up from 8.8 million in December 2000.

 

SNAP SHOTS:

  • Town houses include townhouses and maisonettes that are semi-detached or terraced.
  • Property values for town houses have increased by 2.95 times since 2001, a 0.1% rise in the last quarter and a 6.4% rise in the last year. The average price for a town house is currently 19.3 million up from 6.5 million in December 2000.

 

SNAP SHOTS:

  • Apartments include apartments, duplexes and triplexes.
  • Property values for apartments have increased by 2.35 times since 2001, a 1.1% rise in the last quarter and an 5.7% rise in the last year. The average price for an apartment is currently 12.2 million up from 5.2 million in December 2000.

 

SNAP SHOTS:

  • Stand Alone houses include houses, bungalows, cottages and villas either on their own plot or in a gated community.
  • Rental values for stand alone houses have increased by 2.99 times since 2001, a 5.2% rise in the last quarter and a 17.2%% rise in the last year. The average rental for a stand alone house is currently Kshs. 170,469 up from Kshs. 56,959 in December 2000.

SNAP SHOTS:

  • Town houses include townhouses and maisonettes that are semi-detached or terraced.
  • Rental values for town houses have increased by 2.48 times since 2001, a 4.0% rise in the last quarter and a 13.9% rise in the last year. The average rental for a town house is currently Kshs. 106,122 up from Kshs. 42,688 in December 2000.

SNAP SHOTS:

  • Apartments include apartments, duplexes and triplexes.
  • Rental values for apartments have increased by 2.94 times since 2001, 2.1% rise in the last quarter and a 15.0% rise in the last year. The average rent for an apartment is currently Kshs. 68,383 up from Kshs. 21,638 in December 2000.
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