Fall in demand slows down increase in house prices

NAIROBI, KENYA: A rise in interest rates and steep climb in cost of living had a dampening effect on house prices over the last three months.

According to a survey by Kenya Bankers Association (KBA), average house prices increased marginally by 0.2 per cent during the second quarter of this year. This is compared to the previous quarter’s 2.75 per cent increase.

According to the Kenya Bankers Association(KBA-HPI) Housing Price Index, the softening signals stabilisation of overall house prices in line with the supply-demand dynamics that were influenced by effects of a slowdown in economic growth and macroeconomic stability-rising inflation and weakening exchange rate.

“The Kenya Shilling exchange rate volatility and a tightening in monetary policy has seen a marginal increase in prices as a result of decrease in demand. While the middle income segment of the housing market has remained strong, we have seen less activity on the lower end of the market,” said Jared Osoro, Director of Policy and Research-KBA.

He also noted that a significant movement has been recorded on apartment prices-which is now a favorable choice for those in the middle class.

There has been a slowdown in Kenya’s overall economic growth from 5.7 per cent in 2013 to 5.3 per cent last year. “Expectations that the projected resumption of robust growth may not be realized is filtering into demand for houses especially in the middle and low-income segments,” said the KBA Housing Price Index report.

The report added that exchange rate volatility and inflationary pressure, which has occasioned the tightening of monetary policy, has also shifted expectations towards a high interest regime.