House prices increased marginally by 1.49 percent in the Fourth Quarter of 2018, reversing the downward trend that prevailed in the preceding three quarters of the year.
According to the Kenya Bankers Association (KBA) House Price Index, the pattern mirrors the price evolution experienced in 2017 with indications that the slow pace of price growth experienced in the past quarters will continue to prevail.
The Index notes that while the modest rise provides respite from the depressed price outlook, it reflects the general house-price stability, attributable to the supply-demand dynamics in the housing market.
“On the supply side, the market appears to be tilting towards few additional units coming into the market due to constrained access to credit by developers,’’ it says, adding that limited credit is a binding constraint on the demand side.
The KBA-HPI further shows that homeowners’ preferences have shifted to new buildings, with buyers exhibiting a strong preference for more floor space. This suggests that developers can benefit from increased plinth area by opting for higher-density developments.
On the other hand, house prices were also significantly influenced by location, pointing to a distinct buyer preference of upper market and middle-income segments compared to lower income segments of the housing market.
The analysis also reveals that during the quarter, the type of house was a determinant of price differences in the various KBA-HPI regions.
“Whereas the KBA-HPI shows a 1.49 percent rise in house prices, the interaction of supply and demand dynamics saw homeowners’ preferences significantly tilt. During the quarter a reversal of preferences saw apartments account for 76.27 percent of the total number of units sold followed by bungalows and maisonettes at 12.12 and 11.62 percent respectively,’’ said KBA Research and Policy Director Mr. Jared Osoro.
The Index concludes that the rise in demand for apartments should be seen in the light of its affordability to home buyers, given the lower cost of construction per unit on the developers’ side. Overall, apartments constituted 76 percent of units offered in the market, followed by bungalows (12.1 percent) and maisonettes (11.6 percent).