House prices slowing down as demand falls

House prices in Kenya increased by a marginal 1.26% in the third quarter of 2015 compared to the second quarter’s 0.2%, according to the latest Kenya Bankers Association Housing Price Index (KBA-HPI) released yesterday. The price movement signalled the softening of overall house prices in line with the demand and supply.

Kenya Bankers Association Chief Executive Habil Olaka said the marginal increase is attributed to the stabilisation in demand and supply caused by a slowdown of economic growth and the emergence of macro financial challenges. The depreciation of the Kenya shilling against the dollar also affected the trend in house uptake. “Quarter three was more challenging because it was characterised by micro-financial challenges due to the depreciation of the Kenya shilling against the dollar,” Mr Olaka said.

While real estate industry has come under focus as one of the reference points for economic growth, the market dynamics have changed due to strict monetary policies by the central Bank through increased interest rates.  According to KBA-HPI Director of Research and Policy, Richard Osoro,this has significantly tightened the market. “We are seeing a sense of sustenance but high interest rates have affected the demand and supply part of the industry,” he said.

Houses ranging between Ksh10 and Ksh20 million shillings are reportedly on high demand as per the indices. This is because middle-income earners are targeting to own homes as opposed to rental apartments. Similarly, gated communities have also attracted high demand due to security issues in the country.

Kenya Bankers Association-HPI, launched in February 2015, provides analytical information to investors and policy makers on the trends in the housing sector.

ALSO SEE: LAND GIVES BEST RETURNS ON INVESTMENT, SAYS REPORT