Nairobi, Monday, August 1, 2016 – The average house prices in Kenya recorded a marginal, but stable increase during the second quarter of 2016, portraying broad market stability in the housing sector. According to the Kenya Bankers Association – Housing Price Index (KBA-HPI), the average cost of houses across the country increased by 1.74 per cent over in quarter two, compared to 1.4 per cent rise recorded in the first quarter of the year. The house price movement in the second quarter of 2016 is attributed to market demand and supply dynamics in the sector that has remained unchanged coming in from the previous quarter.
The house price movement in the second quarter of 2016 is attributed to market demand and supply dynamics in the sector that has remained unchanged coming in from the previous quarter.
The supply of housing units has been in response to the broad demand characteristics in the market as reflected in three factors:
- 1. One, 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.
- 2. Two, the support of the financial sector generally and the banking industry in particular towards home acquisition has been enabled by a generally stable macroeconomic environment.
- 3. Three, there has been a gradual opening up of new geographical areas for housing development in response to physical infrastructure expansion, especially transport.
According to KBA Director of Research and Policy, Jared Osoro, the KBA-HPI quarter two findings and the first quarter of 2016, indicates a sense of taste consistency among buyers. “The price movements during the quarter continued with a limited change in preference characteristics during the first quarter of 2016 was reflected in the influencers of price movements remaining to be the size of the house as measured by plinth area, number of bedroom, bathroom, and presence of domestic staff quarters,” said Mr. Osoro. The sub-regional indices based on a moving base reflects an upward, albeit modest, trajectory in the price of apartments in all the regions. This implies that the quarter-to-quarter price movements are on an upward trend. The fixed base index showed price grow at a slower rate across all the regions, a pointer to the general trend towards entrenching house price stabilisation. This trajectory is consistent with the broad stability observed in the overall HPI. Like the overall index, the sub-regional indices were a reflection of the market alignments in pursuit of affordability (effective demand) and the fact that home owners seem to be focusing more on attributes such as gated community, amenities such as recreational facilities, and shopping mall, among other attributes. An interesting insight from the sub-regional indices is that the price movements, though still modest, is more noticeable in the upper market segment, a fact that underlies not just by the units available in this segment but also reflection of the limited supply of units to the lower end of the market.
Note to Editors:
To better guide policy makers and investors on the trends in the housing sector, the banking industry’s umbrella body, the KBA, launched the KBA-HPI in February 2015. The Index has quickly been recognised as a credible analytical tool that is useful for tracking housing sector dynamics and price movements. The Kenya Bankers Association Housing Price Index follows the Laspeyers Index method where the index is computed by getting the ratio the estimated current quarter price from the hedonic method multiplied the weights of the preceding quarter to the price of the preceding quarter multiplied by the respective weights of that quarter. The weights of the quantitative variables are obtained by getting their respective mean values. For the dummy variables however, their weights are computed as the proportions of the number of houses possessing a certain attribute to the total number of houses.
The KBA-HPI regions are based on clustered price ranges across several counties as follows:
- Region 1: Athi River, Mlolongo, Mavoko, Nakuru, Ngong, Ruaka, Syokimau, Embakasi, Kahawa Wendani. Thika, Mtwapa, Utange, South C, Kitengela, Kiembeni, Nyeri, Likoni, Eldoret, Ruiru, Kilifi, Nakuru, Kisii, Thika Road (Kasarani,Roysambu, Ruaraka).
- Region 2: Thindigua (Kiambu Road), Kiambu, South B, Kabete, Komarock, Imara Daima, Membley, Buruburu, Rongai, Waiyaki Way (Uthiru, Kinoo, Kikuyu, Regen), Mbagathi Road, Ngong Road, Langata.
- Region 3: Kileleshwa, Kilimani, Lavington, Westlands, Spring Valley, Riverside, Milimani (Kisumu), Milimani (Nakuru), Runda, Karen, Garden Estate, Parklands, Ridge Ways, Muthaiga, Loresho, Kitsuru, Adam Arcade, Nyali, and Mountainview.