Owning a home in Addis Ababa imposes heavy burdens due to high bank loans and market pressures. Buyers commit to 20-year mortgages with 85,000 Birr monthly payments, while similar homes rent for just 15,000 or 20,000 Birr. This systemic issue could be alleviated by the emergence of a formal capital market.
The dream of owning a home in Addis Ababa resembles a peculiar fever, gripping young professionals, returning diaspora, and families. Buyers commit to 20-year loans at 85,000 Birr monthly for a 5 million Birr home, while identical properties rent for 15,000 or 20,000 Birr, offering greater liquidity and freedom.
This gap is no mere market error but a systemic fracture driven by soaring construction costs from supply chain bottlenecks, limited local production, and import reliance. Cement, steel, and sanitary ware prices appear detached from reality. Banks impose irrationally high lending rates to mitigate risk, turning repayments into perpetual debt service rather than principal reduction.
Homes are viewed not as shelters but as investment vehicles amid the absence of a mature Ethiopian capital market for stocks and bonds. This speculative demand perpetuates a cycle, boosting construction that inflates material costs and elevates housing to luxury status over basic need.
The advent of a formal capital market, offering stocks, government securities, and corporate bonds, could disrupt this by providing alternatives for savings against inflation and devaluation. It would enable investments in manufacturing, technology, and agriculture, redirecting billions locked in speculative real estate toward productive sectors like startups and factories.
Ultimately, this shift recalibrates the homeownership dream, separating it from investment pressures. As Befikadu Eba writes, it could free families from debt and foster a more diversified economy, transforming the skyline from speculative monuments to symbols of societal progress.