Kenya’s housing market stayed broadly steady in the third quarter of 2018, even as price growth cooled. The Kenya Bankers Association (KBA) Housing Price Index for the quarter, published on 20 November 2018, shows house prices rose by 1.35%, down from the 1.76% increase recorded in the second quarter of 2018.
The report says the softer tone reflected subdued demand despite continued investment in housing, with the market still tilted toward middle- and high-income buyers. KBA noted that the overall movement in prices remained below 1% in some measures, pointing to a market that was stable rather than sharply rising.
That moderation marked a reversal from the stronger uptick seen between the fourth quarter of 2017 and the first quarter of 2018. KBA said the changing pace of growth suggested that both developers and financiers would likely adjust their risk appetite as the market responds to supply-side changes, including the government’s affordable housing initiative once projects begin to come on stream.
The index also showed mixed signals in its base measures. While the KBA-HPI remained on an upward path, the fixed base index fell over the previous three quarters and stood at 118.75 in the third quarter of 2018. The moving base index, however, continued to point to a positive outlook.
According to the report, the main drivers of house price movement in 2018 were largely unchanged from the previous three quarters, which KBA interpreted as consistency in homeowner preferences. The hedonic estimates for Quarter 3 of 2018 were compared with those of Quarter 2 of 2018 and Quarter 1 of 2018 to support that view.
Some property features remained important in pricing. The number of bathrooms, the presence of a backyard and a master ensuite continued to influence prices, even though the size of the house as measured by plinth area was no longer significant in the third quarter of 2018. KBA said demand in the market was depressed at the time.
Other factors pushed prices down. Houses with more floors were less favored, suggesting buyers preferred stand-alone units. Wooden floors and the age of a house also had a negative effect on prices.
Buyer preference also shifted by property type. Bungalows accounted for 38% of demand, apartments 35%, and maisonettes 27%, reversing the dominance apartments had held in the previous four quarters. KBA said the pattern showed a market increasingly skewed toward the upper end.
The report added that maisonettes were concentrated in the upper market, bungalows were also strongest at the top end, while apartments were spread more evenly across the upper, lower and middle segments. KBA said developers would need to keep pace with the rapidly changing preferences across regions and housing types.
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