Investment

The Illusion of Homeownership As Wealth: Why Your House Might Be Your Biggest Financial Mistake

BY Steve Biko Wafula · April 5, 2025 11:04 am

For decades, the belief that owning a home is the ultimate sign of financial stability has been deeply ingrained in the minds of many Kenyans. Families stretch their budgets, take out long-term mortgages, and sacrifice investment opportunities, all in pursuit of that one dream: homeownership. It is marketed as the safest and most reliable way to build wealth. But is it?

Consider the numbers. In Kenya, the average mortgage interest rate hovers between 12% and 14%, making homeownership an expensive endeavor. The majority of homeowners spend their entire working lives repaying these loans, and many do so without diversifying their investments. The result? Their wealth is locked in a single, illiquid asset that does not generate cash flow unless rented out. And even then, rental yields in major cities like Nairobi remain relatively low, averaging between 5% and 7%, barely outpacing inflation.

The housing market itself is unpredictable. While land values in places like Karen and Runda have seen massive appreciation, many middle-class homeowners in satellite towns like Kitengela, Juja, or Rongai have found themselves in a different scenario. Their homes may have appreciated on paper, but liquidity remains an issue—selling a house in a down market can take months, if not years, forcing owners to accept lower prices than expected.

This brings us to a crucial point: a house is an asset, but only under the right conditions. If it does not generate income or appreciate at a rate higher than alternative investments, it becomes more of a liability. Maintenance costs, land rates, property taxes, and unforeseen repairs eat into personal finances, making homeownership a continuous expense rather than a wealth-building tool.

A better strategy for financial independence is to embrace diversification. The Nairobi Securities Exchange (NSE) offers various investment opportunities, yet only 1.5 million Kenyans own shares. The number of cryptocurrency holders in Kenya, particularly in Bitcoin and Ethereum, has grown significantly, with reports indicating that Kenyans transacted over $20 billion in crypto between 2021 and 2022. Meanwhile, business investments—ranging from agribusiness to e-commerce—continue to provide far better returns than the average home, but they require a shift in financial priorities.

The challenge is psychological. Many people equate homeownership with success, even when it financially strains them. The moment one secures a job, the pressure to buy a home begins. Parents expect it, society demands it, and banks readily offer mortgages. Yet few ask whether it’s the smartest financial decision. They assume a home will always appreciate, ignoring the realities of economic downturns and market shifts.

In contrast, those who focus on cash-flow investments build financial freedom faster. Take the case of someone who, instead of purchasing a home for KES 15 million, invests in a mix of dividend-paying stocks, government bonds, and a profitable side business. With average dividend yields at 5%–10% and fixed-income securities offering stable returns, they could generate substantial passive income while keeping their capital flexible.

We must rethink how we define financial success. Homeownership has its place, but it should not come at the expense of liquidity, cash flow, or investment diversification. The key to real wealth is ensuring that your money works for you, rather than being tied up in an asset that only costs you more.

About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters.He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com