This archive report was first published on 14 August 2019.
Kenya's housing market has been facing a slump, with a recent survey by the Kenya Bankers Association (KBA) revealing a decline in demand for houses and a reduction in new unit developments.
According to the KBA's Housing Price Index report, house prices have remained subdued for the second consecutive quarter, with a 1.72% decline between April and June. The lower-income segments have been the hardest hit, with a 2.78% decline in house prices during the first quarter of this year.
The KBA attributed the decline in demand to weak household income, limited funding to the housing market, and increased non-performing loans in the construction sector. Additionally, lenders have introduced tighter credit standards, making it difficult for borrowers to access mortgage loans.
As a result, households have been unable to purchase houses, while developers have struggled to put up new buildings due to limited funding. The number of building approvals fell to 2,238 for the period July to November last year, from 2,252 between January and June the same year.
However, the survey found that flats continued to dominate the market, accounting for 81% of the total units offered during the second quarter. This is an indication that land pressures have pushed developers to build flats to maximize space utilization.
"The continued dominance of flats in the housing market is a clear demonstration of the predominance of the middle-income segment of the population," said the KBA. "From a developer's perspective, this outlook is one way of dealing with the pressure of land prices and hence the need to build further upwards."
