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House Price Uptick on the Back of Broad Stability

Nairobi, April 28th 2016 - The Kenya Bankers Association Housing Price Index (KBA-HPI) reflected an uptick in house prices in the country during the first quarter of 2016, with the movement representing a reversal of the mild decline in the rate of growth seen in the previous quarter. The average house prices in Kenya increased by a modest 1.4 per cent during the first quarter of 2016 compared to a 1.14 per cent rise in the last quarter of 2015.

Whilst this market movement represents an increase in house prices, it depicts a sense of broad market stability given that such increases have been mild at best. This is confirmed by the evolution of the KBA-HPI which as at the end of the first quarter of 2016 had risen by 9.08 percent since the base period of the first quarter of 2013.

The demand and supply market dynamics have not been subject to significant changes over the period. The supply of housing units has been in response to the broad demand characteristics in the market as reflected in three factors:

- 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; 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; and Three, there has been a gradual opening up of new geographical areas for housing development in response to physical infrastructure expansion, especially transport.
- Similarly there has been a sense of taste consistency amongst home buyers. The limited change in reference characteristics during the first Quarter of 2016 was reflected in the influencers of price movements remaining the size of the house (as measured by plinth area, number of bedroom, bathroom, and presence of domestic staff quarters).
- Besides size, houses in gated communities will tend to be highly priced given the superior ambience associated with controlled development, security, privacy and scenic value. Similarly, proximity to social amenities such as shopping malls, tarmacked roads, schools, hospitals and presence of parking lot among others significantly contributed to price rise in the quarter.

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 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.

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