In Kenya, the real estate industry is a free market in that the price of housing is driven by supply and demand. The higher the demand, the higher the prices with the inverse also applying.
Over the last couple of years, the Kenyan economy has witnessed exponential growth of the middle-class. What this means is that as the disposable incomes of more Kenyans increase, many people are able to construct their own homes and are also able to get mortgages to buy houses. This, in turn, fuels the real estate sector.
As the real estate industry appears to be more lucrative and with limited supply, speculators come in, further driving the prices higher.
A housing bubble comes about when the market prices reach unsustainable levels and naturally decline. According to the International Monetary Fund (IMF), the bubble is a temporary event which may last up to several years.
The property sector exists in relation with other sectors and one can predict the trend of real estate with other factors in the economy. With these, you can identity a housing bubble. But how can one predict the markets? How can one differentiate the realistic price rise from the bubbles?
Source: Business Daily