House prices continued to drop in the three months before September as demand for houses dropped further. According to Kenya Bankers Housing Price Index, house prices fell by 2.28% as compared to 1.72% in the previous quarter.
Moreover, the supply side of housing also saw a decline due to slower cement production and fewer approvals.
The declining demand in homeownership is as a result of tight credit conditions to households which limit resources available to own houses. Additionally, limited disposable income also hinders homeownership.
Kenya experienced a declining demand for houses despite the overall output growth in the economy.
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“This has adversely influenced their ability to access appropriate resources toward homeownership. Households’ disposable incomes remain constrained,’’ confirmed KBA Research and Policy Director Mr. Jared Osoro.
Low demand for housing comes as Kenyans prefer to travel long distances in search of cheaper rental units. As a result, developers are constructing less new units, selling existing units at lower prices.
“Demand factors that explain the subdued outlook include a clear disconnect between the overall output growth in the economy and effective demand by potential homeowners. Secondly, the tight credit conditions that have seen a decline in advances to households has adversely influenced their ability to access appropriate resources toward homeownership. Lastly, households’ disposable incomes remain constrained,’’ confirmed Osoro.
The declining price is a reverse trend from the positive price growth since 2014. According to the KBA – HPI index, the first three quarters of 2019 all recorded a price drop, with the biggest drop of 2.78% in Q1.