House prices in Kenya remained depressed during the second quarter of 2019, reflecting early signs of an emerging trend where negative prices have been recorded in two consecutive quarters, the Kenya Bankers Association(KBA) said on Friday.
Previously, negative trend has been followed by a correction in the subsequent quarter, noted KBA.
According to the KBA House Price Index (KBA-HPI), house price movements saw a quarter-on-quarter reduction of 1.72 percent, compared to the pace of 2.78 percent reported in the first quarter of 2019.
The Index associates the slowdown with persistent credit contraints, which have continued to affect both the supply and demand side of the house market.
The KBA-HPI notes that weak household income has been a key factor keeping the demand for homes low, with the slight up-tick in private sector credit growth experienced during the first half of the year offering little respite.
The situation has been exacerbated by limited availability of funding to the housing market due to increased Non-Performing Loans generally and especially the construction sector, adversely influencing the risk appetite of lenders.
‘’The supply-side weakness can be inferred from a reduction in the number of building approvals. While there was a rise in sales during the quarter, the KBA-HPI indicates that the development was result of supply ‘spilling-over’ from the previous quarter and not introduction of new buidings,’’ said KBA Centre for Research on Financial Markets and Policy Director Mr. Jared Osoro.
On the total units offered, apartments sustained dorminance at 81 percent, highlighting the influence of the middle-income segment of the population on the market.
They were followed by maissonettes (13 percent) and Bungallows (6 percent), suggesting that land pressures have pushed developers to build apartments to maximise space utilization.
JK/abj/APA