House Prices Stabilize After Property Market Recovery
Nairobi, September 13th, 2018 - House prices failed to sustain the 2.08 percent pace of market recovery experienced in the first quarter of 2018 despite recording an overall 1.76 percent increase during the second quarter. This is according to the latest Kenya Bankers Association Housing Price Index (KBA-HPI), which also shows that the cost of acquring a home stabilised for the first time in the period under review since the first substantial rise in the first quarter of 2018.
Notably, the recovery recorded in the first half of 2018 came in the wake of strained market conditions that advesely influenced the rate of price growth for five consectuive quarters from the fourth quarter of 2016. The trend was attributed to various factors among them shrinking private sector credit growth, and market anxiety and political insability that preceded the 2017 General Elections.
Despite the renewed price stability, the KBA-HPI indicates that the increase should be considered in the context of being a reprieve, because the rise could be associated with transactions from previous quarters that were put on hold due to market anxiety and lower lending risk appetite folowing the enactment of the Banking (Ammendmemt) Act 2016. The conditions could have influenced potential buyers' decisions to withhold home ownership investments, according to the report.
"We, therefore, maintain the caution that two quarters are not enough to conclude the trend will hold in subsequent quarters. Subsequent quarters of 2018 will be critical in arriving at a solid conclusion that the market has stabilised," said KBA Research and Policy Director Mr. Jared Osoro.
Athough price drivers remained the same as in the previous quarter, prices in the period under review were largely driven by house size, number of bathrooms, presence of balcony, backyard and master ensuite, with the presence of a separate dining area and swimming pool being significant drivers.
Out of the three types of the houses surveyed, apartments, bungalows and maisonettes commanded a fairly equal market share, with apartments comanding about 38 percent of the market compared to 33 percent percent and 29 percent for bungalows and maisonettes, respectively.
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, 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.