HOUSE PRICE UP AS APARTMENT SALES ACCOUNT FOR 60pc
House prices rose by 2.2 per cent in the three months to September with apartment sales the key driver, a survey by Kenya Bankers Association shows.
Apartments accounted for nearly three-fifth of the sales during the quarter, at 58.5 per cent, which was attributed to demand by the rising middle class in the country.
Maisonettes accounted for 24.3 per cent of sales while bungalows were 17.1 per cent.
“This is the fastest rise in prices on a quarter to quarter basis with the previous five quarters consistently below two per cent,” said KBA director of research and policy Jared Osoro.
In the quarter ended June the Kenya Bankers Association Housing Price Index showed house prices rose 1.7 per cent. The index shows house prices have risen by 13.3 per cent in the last 15 months, signaling high returns enjoyed by investors in the industry.
The faster movement in prices comes at a time when other factors such as low credit growth and job losses are pointing to a gloomy economy.
Bank financing of the real-estate sector rose by 18.3 per cent in the year to August compared to 5.4 per cent in credit to the private sector, pointing at a growing preference by bankers to fund the housing sector.
KBA noted that banks were looking at security-based lending following the introduction of interest caps mid-September, which will push up funding for real estate.
There have been concerns that the local real estate sector is being driven by dirty money, mainly from looting of public funds. KBA dismissed such claims stating the country has a strong regulatory environment that would single out such irregularities.
Demand for mortgages is expected to pick up with the recent interest cuts from highs of 24 per cent to 14 per cent.
Kenya had 24,458 mortgage loans as at the end of December compared to a total of 8.5 million loan accounts in the country.
Meanwhile, slow sale of houses has pushed most developers to rent units.
“The new units being put up in the market are mainly targeting the middle end of the market, with the lower end experiencing supply constraints arising mainly from the tendency of developers inclining more towards renting than selling,” said Mr Osoro.
KBA findings differ with those of realtor which reported a property price increase of 1.2 per cent in the third quarter, slower than the four per cent growth recorded in the three months to June.
“This was mainly attributed to the cooling down of semi-detached house prices, which had been witnessing annual growth rates of over 20 per cent earlier in the year down now to less than 10 per cent,” realtor stated in its survey released last month.