As with most economies, Rwanda has a housing shortage; firstly our housing stock is limited, most of it is low quality, and the prices are too variable to adequately categorise the housing sector. Housing is the industry most affected by instant changes in demand. At the moment in Kigali there is a need for affordable housing in order for middle-classes to save money and accumulate wealth; if the majority of your salary is spent on housing then it is detrimental to the economy. A housing boom is a transfer of wealth from the banks to homeowners in exchange for future earnings in the form of mortgages; a house is a great investment because it appreciates in value, is solid collateral, is durable, is both an investment as well as a consumer good depending on the use be it rent or living in. Long-term planning is essential in managing demographic trends; most of our housing is inadequate because we failed to anticipate the need for low-cost housing. There is a rapidly growing professional class and they are moving out younger. So we have a trend of fewer people per house causing a strain on supply. We built houses that were inadequate for our needs; all those gigantic houses in Nyarutarama now look like a poor investment but they can be rescued. We need middle to small size construction companies that can convert those beasts into something usable for the general public. Government needs to tax houses by the area and the zone; and restrict planning permission for obscene houses in order to encourage low-cost housing. Landlords should look more long-term and seek a niche budget; take advantage of this young upwardly mobile class that wants a place to live before they marry, rent room by room and you will get more for a house in a nice area. These young people will soon marry and you can rent the whole house to them; too many a Rwandan wants to own houses and this raises prices of materials. We should not lock a tremendous amount of capital in one asset namely homes; mainland Europe has a culture of renting while UK has 70% home ownership. This meant that UK was badly affected by the housing market collapse after the credit crunch; now the market is frozen much like Kigali now, few are buying or selling as before. Build-to-rent is still the main source of housing stock; the owners often take high debt to finance projects and end up over-budget and charging a premium for sub-standard housing. The standards required for housing are rising all the time while few houses are coming on-stream that meet that standard. The elasticity of the price of housing is another issue; put simply the price is too variable and rises up and down too easily. A house in Nyamirambo can cost a fraction of the rent in a house elsewhere even if they are the same quality; location is everything in housing as the nouveau riche jostle for prime spaces in prime areas. So the real core market is neglected, too many people look to the top of the market when it is the lower to middle segment that is both numerous and profitable. Landlords all dream about the rich NGO worker that will roll into town and give them $12,000 for 6 months; we need to be more realistic. The expat market always distorts the wider market when there is limited stock; they price out young professionals and new families. There is always a lag in increasing supply because of the long time it takes to build a house; but we can convert the “MTV Cribs” kind of houses into multi-occupant affordable housing within a year and reduce housing inflation. This is the Eureka moment – we don’t have increase our GDP by 10% but merely reduce housing costs by 10% . I want to have a dialogue with players in the housing sector in the next few weeks and I would like my good friend Charles Haba to tell us his take on the situation in the housing business. ramaisibo@hotmail.com
