According to the World Bank, millions of potential buyers have been blocked due to ten-fold rise in house prices, the situation is worsening Kenya’s home ownership crisis.
High prices have rendered more than 90 per cent of Kenyans incapable of buying the cheapest houses, leaving only a tiny segment of the population in the home’s market.
Kenya remains the only country in the region that has home prices rise beyond the reach of the majority of its citizens. The cheapest homes in Nairobi now range between four million Kenya shillings up from 500, 000 shillings in the year 2000.
The housing market has failed to meet the rising demand in the lower-income segments of the economy pushing more than 60 percent of those living in Nairobi and other towns in informal settlements.
Allen Dennis, senior World Bank economist said that in 2013, prices were nearly three times those in 2000, creating fewer opportunities for low- and middle-income families. Besides, the lowest-priced house already cost Sh1.3 million in December 2012 and currently; there is almost no supply in the market for homes priced at less than Sh4 million especially in Nairobi.
Kenya needs to build two million affordable city homes to meet a growing housing deficit and stem the growth of sprawling slums, home to six out of 10 urban households, the World Bank said.
Investment in housing, it said, would also create jobs, improve economic growth and strengthen the country’s financial services sector.
World Bank says in a report said that many Kenyans are unnecessarily living in slum dwellings, because of limited supply and lack of affordability. The problem will only become cuter over the next decades without a serious focus on housing and the finance of housing for the average Kenyan.
The high cost of houses is mainly driven by speculative land dealers who have overpriced the most critical element in real estate development.
World Bank economists say mortgage lending dropped by two-thirds after Kenya introduced interest rate cap last year, pushing the mortgage market to a 15-year low by the end of 2016.