Page 14 - BEA December 2019 - January 2020

Credit Crunch Pushes Growth of House Prices to
Five-Year Low - KBA

ata released tonnes to 460,967, respectively. pointer to a depressed market if
by the Kenya sustained.
Bankers Asso- On the demand side, among
ciation indicates the factors highlighted as con- Overall, buyers showed
Dthat house price tributing to the decline include a distinct preference for the
growth declined by 2.78 percent challenges facing prospective number of bedrooms and bath-
in the first quarter of 2019 while home buyers especially in ac- rooms among other factors as
building and construction sector cessing bank credit. Other fac- opposed to overall plinth area,
credit growth between July 2017 tors cited include a cautionary with apartments maintaining
and June 2018 averaged at 1.2 stance of many households due its previous dominance in the
Percent. to strained economic condi- housing market, accounting for
tions and squeezed household a relatively high share of sold
budgets. Although the price units at 62.62 percent, which is
The rate of growth in house movements resonate with a gen- a structural feature that would
prices during the period in re- eral stability recorded since the potentially change with the
view went down by 2.78 percent second Quarter of 2018, the new implementation of the Afford-
during the first Quarter of 2019, findings note that the stability is able Housing Programme under
in what also marked the third seen as tentative and could be a the Big Four Agenda.
decline since the Kenya Bankers
Association House Price Index Land prices registered modest growth with focus
(KBA-HPI) base period. The on the direction of the interest rate caps
other two instances were report-
ed in the last Quarter of 2013 he Hass Land price indi- velopers and buyers become dif-
and the third Quarter of 2014. ces for the third quarter ficult as commercial banks have
Tof 2019, showed modest
The latest KBA-HPI attributes growth for both suburbs and become conservative at lending.
We expect this to change should
the decline to the constrained satellite towns over the quar- interest rates become market
credit flows to both the supply ter. Land prices in the suburbs driven,” said Ms. Sakina Has-
and demand side of the housing increased by 0.22 %, while in the sanali, Head of Research and
market. satellite towns growth stood at Marketing at HassConsult.
1.44%.
She added that market-driven
On the supply side, the Growth in the suburbs was interest rates will also nudge
Index associates the slowdown driven by Kitusuru and Lore- banks to return to longer dated
to a slump in the rate of credit sho suburbs which continue to loans.
growth to the building and benefit from the completion of “Real estate projects tend to be
construction sector between the Waiyaki Way-Red Hill link long-term. As such when loans
July 2017 and June 2018, which road which has improved acces- are shortened many potential
sibility.
averaged at 1.2 percent. “The borrowers tend to be locked out
influence of the credit supply to In the satellite towns Tigoni of the credit market,” added Ms.
this sector, a good proxy of avail- recorded a 2.89 % over the quar- Hassanali.
ability of funding for housing ter while Syokimau was top on
The Gigiri suburb recorded
construction, manifested itself in an annual basis with a 10.58% a 2.11 % drop over the quarter
supply constraints after a period growth. while Upperhill recorded a 2.55
of about a year,” reports KBA. In “The real estate sector is chal- % on an annual basis.
addition, the volume of cement lenged by the lack of liquidity
consumption also between July as a result of the amendment For satellite towns Ongata
2017 and November 2018 also of the Banking Act in 2016 that Rongai recorded a 1.45 % drop
dipped from 553,631 metric introduced interest rate caps. We while Kiambu record a 1.69 %
have seen access to credit by de- increase on an annual basis.
12 Building East Africa | December/ January 2020
12
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