Rate of growth in house prices drops 2.78%, largest decline since 2013
The Kenya Bankers Association-Housing Price Index shows that growth in house prices declined by 2.78 per cent in the first quarter of 2019. It is the largest decline since 2013, the base period for the Housing Price Index.
The slowdown is attributed to the drop in access to credit in the building and construction industry. Between July 2017 and June 2018, the rate of credit growth to the housing sector averaged at 1.2 per cent, a significantly low growth rate. According to a report by the Bankers Association, the volume of cement used between July 2017 and November 2018 dropped from 553,631 metric tonnes to 460,967 metric tonnes.
“The influence of the credit supply to this sector, a good proxy of availability of funding for housing construction, manifested itself in the supply constraints after a period of one year,” KBA noted.
On the side of home buyers, demand was low due to limited access to bank loans and decreased spending as a result of the harsh economic environment. Although the movement in house prices has been stable since Q2 2018, KBA findings note that if the price stability is sustained, it could be an indication of a depressed market.
In the housing market, apartments maintained the lead with the highest demanded units at 62.6 per cent, followed by maisonettes at 23.4 per cent and bungalows at 14 per cent. The high demand for apartments shows that middle-income earners dominate the housing sector. Government’s plan to create affordable houses for low-income earners is expected to shift the demand for apartments.
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