Picture this, an employed man in his 30s with an active savings account and a colleague, the same age but with a mortgage for his home to service.
It’s a tale of two people who made different decisions.
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Their reasoning could be right or wrong depending on how you see it. But just which is a better move? Saving your money in a bank account or investing in a house?
So get this. A recent survey by the Kenya National Bureau of Statistics (KNBS) found that the majority of homeowners in Kenya (85.5 per cent) are in the rural areas while urban areas home ownership stands at 22.8 per cent.
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Home ownership in the urban areas has continued to be increasingly expensive, with the survey showing higher percentages of households paying rent/leasing at 72.3 per cent in the cities.
Yet, it is the dream of every young man and woman to one day own a home and close the chapter of renting.
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In addition, demand for homes and land continues to rise by the day, with realtors reporting that residents have turned to satellite towns as the cost of land continues to rise.
Options for purchasing a home
In Nairobi, for example, residents have turned to towns in the outskirts as they rush to own homes before a further hike in prices.
These findings point to one option for any employed youth: the need to start investing in a house. As the adage goes, the earlier the better.
It is a game of time, to help you accomplish your home ownership dream early enough before prices soar further.
Taking a mortgage, for example, could be a practical way of acquiring a home without straining your finances as a civil servant or an employee.
Mortgage financing ranges depending on several factors including job groups and affordability. What’s more, a good mortgage will come with repayment periods that help you service the loan comfortably. As always, there is a product for everyone.
Alternatively, youthful civil servants or the working class can consider the rent to own way.
Rent to own option
This refers to an agreement where you rent a property for a specific period with the option to buy it before the lease expires.
Under this facility, a tenant pays a deposit of an agreed sum of money (downpayment) while a portion of your rent payments goes towards the remaining purchase price.
Eventually, you become a homeowner, as opposed to continuously paying rent without a retirement plan.
Also Read: Nairobi Estates and Satellite Towns Where Land Prices Have Dropped
Several companies in Kenya have since adopted this system in their business, presenting a convenient way for middle-class to acquire homes.
The Affordable Housing Program ran by the state is also an example of rent to own options in Kenya.
Through the dedicated Boma Yangu platform, you can start your home ownership journey by paying an agreed deposit and later proceed to pay monthly instalments to meet the purchasing price.
What a savings account offers
On the other hand, a savings account offers opportunities for you to save your money to achieve your goal.
With the fixed terms of the bank, the account will help you save money to keep it secure until it matures.
The bank will ensure safety of your money from risks, guarantee you of returns from interest, and give you liquidity in that you can easily access your money if need arises.
Also Read: From Artisans to Directors: How Juakali Group Turned Affordable Housing into Thriving Company
On the flip side, having your money in the bank denies you an opportunity to appreciate your wealth as would have been the case in the real estate way.
Property in most places in Nairobi has been appreciating while the value of currency depreciates with time. The purchasing power of money continuously depreciates over time.
There is also the risk of going back on your resolve to save if a need arises as the money is often readily available.
While savings offer you flexibility, the guarantee of a home in the future and appreciation of property is just too good to overlook.
