Cash crunch in tough year blamed for fall in house prices

A tightening of disposable income among potential home buyers led to a decline in house prices in the last quarter of last year, according to a new report.

Kenya Bankers Association (KBA) said yesterday in its House Price Index with little liquidity in the market, house prices decreased by 0.61 per cent during the priod under review.

The reduction in prices was a reaction to potential buyers’ inability to afford houses at higher prices, reducing demand and, in turn, forcing developers to offer discounts on house prices.

Elevated level of non-performing loans in the real estate and the construction sector, which has constricted the private sector growth, has also been blamed for the negative trend.

“A rising distressed properties overhang forced home sellers to reduce asking prices of their properties,” said KBA Director of Research and Policy on Financial Markets Jared Osoro (pictured).

“This negative feedback loop has clouded the house market outlook and led to price rediscovery in favor of a downward correction.”

Mr Osoro also noted a sustained five-year market correction which came with modest price increases.

According to the report, apartments remained the most popular among buyers, although their market share dipped from 85 per cent in the third quarter of last year to 74 per cent in the last quarter. 

Preference for maisonettes, on the other hand, rose from 10 per cent in the third quarter to 17 per cent in the fourth quarter, while preference for bungalow stopped at nine per cent.

More spacious houses, those with more bathrooms and bedrooms, attracted higher prices.

 The location of houses, as well as the number of floors, also affected the prices, with few-floored, low density ones also attracting higher prices.