- According to a newly released report by the Kenya Bankers Association (KBA), house prices in the country has been steadily falling down, despite early predictions that the sector will bounce back this year.
- The downfall trend was the clearest signal of a reversal from the noticeable price surge that was recorded in the first quarter of 2018.
3 things Kenyans now consider before buying or renting a house as real estate sector slowly heads for a bubble bust
The downfall trend was the clearest signal of a reversal from the noticeable price surge that was recorded in the first quarter of 2018.
Kenya’s once thriving real estate may be headed to a bubble bust sooner than anticipated.
According to a newly released report by the Kenya Bankers Association (KBA), house prices in the country has been steadily falling down, despite early predictions that the sector will bounce back this year, after poor performance witnessed last year occasioned by prolonged electioneering period.
The Housing Price Index (HPI) report covering three months to end of September shows despite prices rising by 1.35 per cent, it still signaled a slower pace compared to the 1.76 per cent rise in the second quarter of the year.
“The situation reflects subdued demand on the back of continued investments in the housing market, which remained skewed in favour of the middle - and high-income bracket,” said Jared Osoro, the director of research and policy at KBA.
The modest increase in the third quarter prices means growth in house prices slowed down for the second quarter in a row.
The findings are based on clustered price ranges across several counties.
Kenya’s real estate industry is one of the strongest and stable pillars of the economy and therefore normally used to measure economic growth.
The sector’s past success, however, seems to have its own undoing since it created a sort of ‘real estate rush’ which saw every Dick, Harry and Tom rush to build a house anticipating great fortune in return only to start wondering where tenants will emerge the minute the investment is complete.
The end result has been finished housing projects lying idle and empty several months if not years after being completed due to supply outstripping demand.
For years now too, developers have concentrated on Kenya’s burgeoning middle class and high-income bracket leaving low earning Kenyans out in the cold with no roof under their heads.
That too is changing and house prices were further depressed by the shift in demand from apartments and maisonettes to bungalows.
“The interaction of supply and demand dynamics saw home owner’s preferences tilt towards bungalows accounting for 38 per cent, apartments 35 per cent and maisonettes at 27 per cent,” KBA said.
As a result, 6 out of 10 urban residents in Kenya stay in slums with the situation only getting worse with time.
The country needs to build 244,000 homes every year in order to meet the ever growing demand, however less than a quarter of these numbers are ever built, according to the World Bank.
Meanwhile, Kenyans continue to use the number of bathrooms, and presence of a backyard and master ensuite as a yardstick to determine house prices and whether to rent or buy a house.
KBA launched the HPI in February 2015 as a tool to help monitor housing sector dynamics and price movements. The index averages the changes in house purchase prices, making it possible to track real estate boom and bust cycles.
But tracking Kenya’s real estate is not a walk in the park either with the multi-billion sector choosing to operate covertly making it near impossible to access important information such as vacancy, tenant mix and pricing.
According to the 10th edition report dubbed Global Real Estate Transparency Index, 2018 by Jones Lang LaSalle (JLL) there is little and limited advancement in real estate transparency in Sub- Saharan Africa.
The report ranks countries' real estate industry into five categories: highly transparent, transparent, semi-transparent, low transparency and opaque.
Save for Africa’s second-biggest economy, South Africa, no other African nation’s real estate market was found to be transparent.
Kenya was ranked under ‘semi-transparent category’ at number 53 with a paltry score of 3.29 points closely followed by Nigeria with a score of 3.73 at number 67 and ranked under low-transparent.
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