House prices across Kenya during the third quarter of 2017 registered the lowest rate of growth in the last three years, recording only a 0.42 per cent rise, a new banking sector survey shows.
The Kenya Bankers Association Housing Price Index attributed the drop to the current political environment and slowed private sector credit.
“Given the current political uncertainty in Kenya and the slowdown 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 association’s chief executive Habil Olaka, said.
The drop was a reduction from the previous quarter’s 0.98 per cent growth and the lowest price increment posted since the third quarter of 2015.
According to the associations’ research and policy director Jared Osoro, the trend on growth in house prices mirrors that of credit growth to the private sector.
“The slowdown in credit growth has been attributed to introduction of law capping interest rates which has further worsened the already declining credit to private sector prior to its introduction and thus discouraged banks from lending to the private sector,” Osoro said.
In addition, the survey showed that the sluggish demand environment has provided little incentive for increased supply of housing units, a situation that is compounded by the constrained supply of financing.
It further noted that the house price drivers during the quarter remained largely unchanged, compared to the previous quarters with the size of the house as captured by base area of the house, number of bedrooms, presence of backyard, master ensuite and gym area being among the core drivers.
Attributes such as the presence of a swimming pool, proximity to basic social amenities, gated community, borehole for consistent water supply and presence of power backup generator significantly were also core in increasing the house prices during the quarter.
In terms of the house types sold, apartments took the upper hand, accounting for 82.66 per cent of the total number of units sold.
Maisonettes and bungalows accounted for 10.70 per cent and 6.64 per cent respectively.
“Across all the market segments prices of apartments registered the highest rise compared to prices of bungalows and maisonettes, with the rise in prices in the latter two segments being more or less muted,” the survey noted.
For the last year, housing prices have been on a declining curve with increase in prices dropping from a high of 2.20 per cent as at the third quarter of 2016 and falling to 1.58 per cent in the fourth quarter of the same year.