Demand for housing in Kenya remains flat in Q3
Wednesday November 28 2018
The housing market in Kenya is experiencing a significant oversupply that has resulted in flat prices during the third quarter of this year.
Even as the government puts in place mechanisms to supply over 500,000 units of affordable housing over the next four years as part of its Big 4 Agenda, developers targeting the middle and high-end market segments have seen subdued demand.
According to the Kenya Bankers Association (KBA) House Price Index, prices declined in the third quarter of 2018 by 0.41 per cent mainly due to lack of enthusiasm from home buyers, whose preferences have shifted from apartments to bungalows and maisonettes.
Buyer preference were skewed in terms of the type of houses and income groups, with maisonettes and bungalows being concentrated in the high-income bracket. Apartments had an almost equal distribution in both the upper and the lower and middle market ends.
The risk appetite of both developers and financiers is expected to increase when the government embarks on developing affordable houses targeting mainly the low-income market.
“The state of affairs in the market reflects subdued demand as investments in the housing market which have remained skewed towards the middle and high-income bracket,” said Jared Osoro, KBA research and policy director.
While the government’s housing agenda is anticipated to spur demand, the plan is already experiencing headwinds as developers shun the low-end property market due to its high risks, and lack of government guaranteed bank loans.
According to the KBA index, which tracks housing sector dynamics and price movements, the drivers of house prices in the third quarter remained unchanged from those of the previous three quarters, signalling consistency in home owner’s preference.
Some 38 per cent of buyers were opting for bungalows followed by apartments at 35 per cent and maisonettes at 27 per cent.
Unlike previous quarters, the size of the house as measured by the plinth area was insignificant.
However, other attributes relating to size such as the number of bathrooms, presence of a backyard and master ensuite continued to feature prominently in influencing house prices.