Connect with us

Business News

Increase in supply now dampens house prices

Published

on

Loading...

[ad_1]

Market News

An apartment block in Kilimani. FILE PHOTO | NMG
An apartment block in Kilimani. FILE PHOTO | NMG 

Housing prices were flat in the third quarter of the year, saddled by increased supply of new units despite subdued demand, the Kenya Bankers Association (KBA) says in a newly released report.

The Housing Price Index (HPI) report covering three months to end of September says house prices rose by 1.35 per cent, a slower pace compared to the 1.76 per cent rise in the second quarter of the year.

“The situation reflects subdued demand on the back of continued investments in the housing market, which remained skewed in favour of the middle – and high-income bracket,” Jared Osoro, the director of research and policy at KBA, said.

KBA launched the HPI in February 2015 as a tool to help monitor housing sector dynamics and price movements. The index averages the changes in house purchase prices, making it possible to track real estate boom and bust cycles.

The modest increase in the third quarter prices means growth in house prices slowed down for the second quarter in a row. It was also the clearest signal of a reversal from the noticeable price surge that was recorded in the first quarter of 2018.

The findings are based on clustered price ranges across several counties.

The index showed that prices jumped 2.08 per cent in the first quarter of the year, much faster than the 0.69 per cent recorded in the fourth quarter of last year.

Overall stability of house prices is derived when changes in the HPI remain under one per cent.

Anticipated changes from affordable housing

KBA says time has come for developers and financiers to adjust their prices in line with President Uhuru Kenyatta’s affordable housing project that aims to develop 500,000 units in five years.

Loading...

“Market dynamics are tilted towards the influence of demand conditions and are likely to respond to the anticipated changes on the supply side once the developments under the government’s affordable housing initiative come on stream,” KBA said.

Prices continued to be determined by the number of bathrooms, and presence of a backyard and master ensuite except that demand for houses available in the market were depressed.

Prices were also depressed by the shift in demand from apartments and maisonettes to bungalows. KBA says home owners’ preferences were more inclined to stand-alone units unlike in the previous quarters.

“The interaction of supply and demand dynamics saw home owner’s preferences tilt towards bungalows accounting for 38 per cent, apartments 35 per cent and maisonettes at 27 per cent,” KBA said.

Fast-changing preferences

That was a reversal of the apartments dominance in the preceding four quarters. In the third quarter of 2017, only 6.04 per cent of units sold were bungalows compared to 82.66 per cent apartments and 10.7 per cent maisonettes.

“The fast-changing preferences imply developers must be abreast with the rapidly changing market preferences,” KBA said.

Home owners’ preferences also show that the market appears to be skewed in favour of the upper segment, which is made of maisonettes and bungalows.

Apartments were found to have an almost equal concentration in both the upper end and the lower and middle market segments.

KBA findings mirror Hass Consult’s October findings for the same period. The Hass Consult’s report showed that property prices grew 1.1 per cent over the quarter, buoyed by the maisonettes, which were up 1.3 per cent.

Semi-detached houses saw a 0.5 per cent price jump while apartment prices rose by 0.8 per cent. Buyers are unsure of the authenticity of land ownership papers and regulatory permits presented during the sale of any property, leading to a slowdown in uptake, Sakina Hassanali, the head of development consulting and research at Hass Consult said.

“The risk position for property ownership papers issued by government has risen tremendously as the same government does not recognise its own papers. This has hurt present and future property deals as investors are unsure of what will happen anytime soon,” she said.

House prices rose less than one per cent in Kileleshwa, Kilimani, Lavington, Parklands, Upper Hill and Westlands in Nairobi in three months to September 2018, according to the report.

[ad_2]

Loading...
Advertisement
Loading...
Loading...

Facebook

Loading...

Trending