The Elusive Mortgage Market

According to data from the Central Bank from 2011 to 2016, the number of mortgages over the five years increased only by 112,107 cumulatively. This was way before the rate cap law for which the housing sector is again grateful for a dip in the credit allocation to individuals seeking mortgages. In a brief, the rate of mortgage growth hasn’t been commensurate with the kind of economic growth that has been experienced in the country. Even at the peak of this country’s most recent GDP rally, there were no more than 20,000 mortgages taken in by the markets.

What we have seen however, is the frequency and openness with which the word middle class is used following Kenya’s most recent outburst of relatively positive economic activity in the region. A quick look at what the market has to say however, leaves more doubt as to whether the markets are yet to spot the middle class on the streets. Perhaps, because of our intellectual fearlessness, we caught onto the word too soon together with the contagion of inflated economic ego. Or that there is not yet a critical mass of this middle class to tilt the economic balance in favour of themselves and everyone else in the country.

Of course, a middle class that cannot sustain to house itself comfortably among other essential provisions does not remain in the middle, and a middle class that cannot escape the trappings of the lower class does not step up into the middle. Last year, the residential mortgage survey indicated the number of mortgages dipped, compared to the year 2015. This is too was another ridicule to the credit worthiness of the middle income persons, adding to the fact that banks also reduced the number of engagements with this risky section of the populace.

Again, historical evidence is fat with facts about how the middle class grows the economy of a nation, influencing consumer behaviour and unleashing human capital in ways that confound the supply of basic needs like housing. That it is the middle class who make the largest contribution to the wealth of a nation.

Without question, for a long time there has been talk and facts about the ever increasing demand for housing in Nairobi, in excess of what the market can supply. Such demand, with the middle class in mind, is good for the market. But there have also been talks of expensive units lying empty in the market in locations the middle class dare not touch despite being the target of developers.

Interestingly, the World Bank early this year, determined that Kenya needs 2 million more low-income homes. The paradox is whether the markets betrayed the middle class or the middle class betrayed the markets, a more likely conclusion considering the tyranny of low-income housing demand.

In a country where 0.5 million people become new city dwellers every year, according to World Bank, the challenge of home ownership clearly is not so much for those seeking better establishment as for starters looking to acquire their first homes. SACCOs, it is to be understood, have provided great relief in this regard. Since inception, theses financial stepping stones have been central in promoting financial inclusion. In all the 47 counties, there are various SACCOs administering to members and customers financial justice where banks would readily abstain. And the reach of SACCOs in housing finance has been no less impressive particularly for starters or low-income groups.

Indeed many stakeholders have expressed the need for greater inclusion of SACCOs in the housing sector. Considering the state of mortgage uptake in the country, the middle class will do well to consider the diverse options at their disposal.