Residential House Prices Stabilize As Demand Softens

According to the Kenya Bankers Association- Housing Price Index ( KBA-HPI), the average house prices in Kenya increased marginally by 1.10 per cent during the first quarter of 2017 compared to the 1.58 per cent rise during the last quarter of 2016.

Residential property prices rose slightly against a suppressed demand due to reduced lending by commercial banks following the enactment of interest capping law in the last quarter of 2016.

According to KBA Director of Research and Policy, Jared Osoro, the house prices evolution since the third quarter of 2016 represents a downward trend, being a reversal of the rising trend that prevailed from the preceding three quarters starting from the last quarter of 2015. “Whereas the supply and demand dynamics have had an equal influence on the house prices trend, the key driver of the softening seen during the first quarter of 2017 and the preceding two quarters lean more towards market demand conditions,” said Mr. Osoro.

It was noted that, across the market segments (Lower, middle and upper market segments) prices of apartments registered the highest rise compared to prices of bungalows and maisonettes. The modest price of apartments indicates an element of affordability to potential home buyers given the lower cost of construction per unit on the developers’ side, and more supply of units in the lower segment given the availability of land compared to the upper market segment.

KBA CEO Habil Olaka observed that the depressed credit market has been an impediment to the development of the housing market particularly for lower income households. He also challenged the developers to develop low costing units for the lower end of the market. “Credit plays a significant role in the growth of the housing sector, it is therefore imperative to remove all the lending and borrowing constraints to enable more activity amongst the middle and lower market segment,” said KBA CEO, Habil Olaka.