•With respect to house type, apartments dominate, and their share rose, accounting for 56.8 per cent of all the completed transactions inQ4from 47.0 per cent in Q3.
•Townhouses, which have been characterized by dormancy since the Q1of 2021, registered a resurgence, with their share of total transactions standing at 0.9 per cent.
House prices decreased in 2021 compared to the last quarter of 2020, according to the latest Kenya Bankers Association Housing Price Index (KBA-HPI).
The report indicates that house prices on average went down by 1.82 per cent in the first quarter of 2021, overturning the marginal recovery of 0.22 per cent recorded in the fourth quarter of 2020.
The decline is attributed to a general price correction trend as well as slow economic growth and weakened households’ purchasing power.
In the second quarter, the prices softened by 1.62 per cent, 3.70 per cent in the third quarter and 3.99 per cent in the fourth quarter of 2021.
Kenya Bankers Association research and policy director Samuel Tiriongo said that the sharp drop in prices in 2021 reflected subdued investments that limited the rollout of new supply amidst easing demand.
"The broader construction and real estate sector manifested declines in the growth trajectory in the fourth quarter of 2021, growing by 6.0 per cent during the quarter down from 6.7 percent growth in the third quarter," said Tirongo.
He added that over the same period, real estate sector activities expanded by 5.7 per cent in the fourth quarter compared to 7.1 per cent in the third quarter.
Based on the KBA HPI index, in the fourth quarter of 2021, housing transactions in the lower-market segment accounted for 58.8 per cent of all transactions, compared with 70.1 per cent in the third quarter.
Conversely, completed transactions in the mid- and high-market segments registered significant improvements, with total transactions rising to 26.8 per cent and 14.4 per cent in the fourth quarter from 19.7 per cent and 10.3 per cent in the third quarter .
With respect to house type, apartments dominate, and their share rose, accounting for 56.8 per cent of all the completed transactions in the fourth quarter from 47.0 per cent in the third quarter of 2021.
On the other hand, the share of bungalows contracted by half compared to the previous quarter to account for 13.3 per cent of all transactions in the fourth quarter.
The share of maisonettes, however, rebounded to 29.2 percent in the fourth quarter, from 22.2 per cent in the third quarter.
Townhouses which have been characterized by dormancy since the first quarter of 2021, registered a resurgence, with their share of total transactions standing at 0.9 per cent.
The steady decline in house prices broadly reflects the headwinds in the economy that influenced both demand and supply characteristics of the market.
With demand remaining depressed, the change in house prices was not drastic, partly because of the downward stickiness of prices; a typical characteristic of the housing market.
At the same time, the sharp drop in prices during 2021 reflected subdued investments that limited the rollout of new supply with easing demand.
As a result, the broader construction and real estate sector manifested declines in the growth trajectory in the fourth quarter of 2021.
While the real estate sector expanded by 5.7 per cent in the fourth quarter compared to 7.1 per cent in the third quarter, growth in construction dropped to 6.0 per cent from 6.7 per cent over the same period.
The sector’s performance was on the back of some of the notable changes in its indicators. For instance, cement consumption (a supply-side proxy) continued to contract, to lag production in the fourth quarter.
In particular, cement consumption declined to 778,088 MT in December 2021 from 856,980 MT in September 2021, as production declined to 791,050 MT from 866,344 MT in September 2021.
Nonetheless, the sector saw mild demand support through the credit growth, as lending to the building and construction sector slightly edged up to 1.9 per cent in December 2021 from 0.5 per cent in September 2021.
However, growth in loans to the real estate sector continued with to decelerate, to 0.6 per cent in December 2021 from 2.9 per cent in September 2021 and 3.2 per cent in July 2021.
On the back of the outlined broader developments in the sector, the intersection of the demand and supply side developments of the housing market resulted in a softening of prices; consistent with a market correction trend observed from the recent past.
Other overarching concerns during the period, included the relatively low levels of concluded housing market transactions against expectations from the switch in April 2021 at the Lands Registry to an electronic system of processing of title transfers.
The divergence in the proportions of house types by region and across types, continued to characterize the dynamics in the market and the interaction between consumer preferences and the affordability of the houses.
According to the report variations in property prices are evident along house type and market segments.
The average cost of a maisonette stood at Sh12.15 million, while that of apartments and bungalows stood at Sh9.38 million and Sh6.69 million, respectively.
Variations in costs across the different market segments are further evident.
The average price of a property in the high-market segment is three times that in the lower-market segment and twice the cost of one in the mid-market segment.
In particular, the average cost of a house in the high-market segment stood at Sh20.95 million, while houses in mid-market and the low-market segment stood at Sh9.85 million, and Sh8.17 million, respectively.
While not dominant, townhouses were the highest- priced, driven by their structural benefits of providing larger plinth area.
Plinth area is a key house demand feature particularly pursued by the mid to up-market segments buyers.