House prices in Kenya for the third quarter of – 2017 posted the lowest rate of growth registered in the last three years, on the backdrop of the current political environment and slowed private sector credit, a new banking industry report shows.
The latest Housing Price Index released by the Kenya Bankers Association shows that there was a 0.42 per cent increase – in overall house prices between July, August and September, a reduction from the previous quarter’s 0.98 per cent growth marking the lowest price increment since the third quarter of 2015.
The declining trend put out in the first quarter of 2017, January – March with prices increase falling to 1.10 per cent, then dropping further to 0.98 per cent in April – June and then sliding further to the current rate of 0.42 per cent.
According to Kenya Bankers Association Director, Research and Policy Jared Osoro, the trend on growth in house prices mirrors that of credit growth to the private sector which has slowed down this year as a result of the introduction of – law capping interest rates.
“With the generally depressed demand in the economy and the slowdown in credit expansion, households relying on the credit market towards home acquisition have been adversely affected,” said Osoro.
The survey noted that the sluggish demand environment has provided little incentive for increased supply of housing units.
The political environment seems to be affecting both sides of the market where potential home buyers seem to be holding back on decisions to invest in home ownership while investors in the real estate could also be on a wait and see mode.
In terms of the house types, during the period under review, Apartments accounted for 82.66 per cent of the total number of units sold in Q3 of 2017 with maisonettes and bungalows accounting for 10.70 per cent and 6.64 per cent respectively.
Across all market segments (lower, middle and upper), prices of apartments registered the highest rise compared to prices of bungalows and maisonettes.
“The rise in the price of apartments compared to bungalows and maisonettes signals an element of the search for affordability by potential home buyers given the lower cost of construction per unit on the developers’ side and therefore relatively low offer process,” added Osoro.
KBA’s Chief Executive Habil Olaka noted that the survey reflects the current political climate and shrinking credit to private sector.
“Given the current political uncertainty in Kenya and the slow down we’ve seen in private sector credit, in part due to the interest rate cap it is perhaps not surprising that we have hit the biggest slowdown since 2015.”
The survey further noted that the house price drivers in this quarter remained largely unchanged compared the previous quarters.