Are interest rates to blame for real estate market woes?
There is a lot of discussion regarding the implementation of interest rate cap law and how it has affected the economy and the real estate market over the last two years.
However, it’s important to understand if (IRC) interest rate cap is the reason behind the industry’s stagnation and bad performance, or if it is simply used as an excuse. The reality is that Kenya’s real estate market has been struggling to avoid a total market collapse for the last almost three years. Even some of the most positive market reports clearly state that the market is under pressure.
Hass Property Price Index for the second quarter of 2018 shows that while there was a marginal 3.6 percent increase in apartment rental prices in Nairobi and satellite towns, land prices stagnated.
KBA latest house price index also shows that despite the high expectations for a market recovery after elections, the market does not seem to respond or to be able to reverse the negative trend of the last two years.
Before analyzing the actual correlation of interest rate caps and the Kenyan property market, it is important to understand what exactly is the interest rate cap law, its history and how it has been implemented.
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