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House Prices Signal Stabilization as Apartments Reclaim Dominance

House prices reverse deceleration rate from 0.51 percent contraction in the first quarter to contract at 0.20 percent in the second quarter of 2020

Apartments regain market preference at 75.6 percent as demand for townhouses declines

Nairobi 10th August 2020 - The growth of house prices remained in the negative territory during the second quarter of 2020, with signs of recovery following the sharp decline recorded in 2019. The latest Kenya Bankers Association House Price Index (KBA-HPI) shows that house prices in the quarter contracted by 0.20 percent compared to the 0.51 percent reduction reported during the first quarter.

Despite still being on the negative side, the growth of house prices points to a stabilizing market with the outlook broadly reflecting the prevailing economic challenges, which have continued to adversely influence both the supply and demand sides of the housing market.

"With demand remaining depressed, the concluded sales during the second quarter of the year represented a nearly 40 percent drop from the previous quarter," notes the KBA-HPI, adding that while demand during the quarter was muted due to a weak economy, the price movements were not drastic, partly due to the characteristic tendency of house prices to resist reductions.

In addition, the sharp decline of house prices experienced in 2019 discouraged investments in the housing market in what the Index attributes to the limited supply of units, compounded by the low demand. "While showing positive growth during the first quarter of 2020, the broader construction and real estate sector manifested the weakness in the broader economy with its expansion of 5.3 percent being 0.38 percentage points lower than a similar period last year," said KBA Chief Executive Officer Dr. Habil Olaka.

Further, the Index notes that house price drivers in the second quarter of 2020 remained largely stable and similar to previous quarters with plinth area, number of bedrooms, bathrooms and region house is located playing a significant role.

On preferences, apartments regained dominance at 75.6 percent of the concluded transactions, more than doubling the 33 percent reported in the previous quarter. They were followed by bungalows and maisonettes, both accounting for a 12.2 percent.

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 recognized as a credible analytical tool that is useful for tracking housing sector dynamics and price movements. The KBA-HPI 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, Kitengela, Kiembeni, Nyeri, Likoni, Eldoret, Ruiru, Kilifi,Thika road (Kasarani, Roysambu, Ruaraka), Meru, Bungoma.

Region 2: Thindigua (Kiambu Road), Kiambu, South B, South C, Kabete, Komarock, Imara Daima, Membley, Buruburu, Rongai, Waiyaki Way (Uthiru, Regen, Kinoo, Kikuyu), Mbagathi road, Ngong Road, Langata.

Region 3: Kileleshwa, Kilimani, Lavington, Westlands, Spring Valley, Riverside, Milimani (Kisumu), Milimani (Nakuru), Runda, Karen, Garden Estate, Parklands, Ridgeways, Muthaiga, Loresho, Kitisuru, Adams Arcade, Nyali, Mountain View, Nyari.

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