Demand for apartments in Kenya surges

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Demand for apartments in Kenya is on a rising trajectory compared to maisonettes and bungalows raising house prices in the third quarter of 2016, Kenya bankers association report has revealed.

Going by market activity and house type, apartments take the largest portion of the total sale transaction at 58.56 per cent with maisonettes and bungalows accounting for 24.31 per cent and 17.13 per cent of the total sales respectively.

The property market seems skewed in terms of the regions and the nature of the house with transaction for apartments being more on the lower and middle market end. Marionettes and bungalows are more in the upper end market.

“Apartments accounted for the largest share of the total sale transactions at 58.56 per cent with maisonettes and bungalows accounting for 24.31 per cent and 17.13 per cent,” said Kenya bankers association director of research and policy Jared osoro.

Also read:Developers eye construction of luxury apartments in Kenya

Just like the first and second quarters, there has been a sense of taste consistency amongst home buyers. The price movements during the quarter continued with a limited change in preference characteristics during the third quarter of 2016 was reflected in the influencers of price movements remaining to be the size of the house (as measured by plinth area, number of bedroom, bathroom, and presence of detached staff quarters).

The search for secure neighborhoods with adequate amenities influenced the price movement dynamics during the quarter.

Thus, houses in gated communities – often highly priced given the superior ambience associated with controlled development, security, privacy and scenic value – were key influencers of the overall price movements.

Similarly, proximity to social amenities such as shopping malls, tarmacked roads, schools, hospitals and presence of parking lot among others significantly contributed to price rise in the quarter.

See also:Cytonn to construct US$ 25m apartments in Kenya

During the period under review housing prices saw a 2.2 per cent rise compared to the previous quarter’s 1.73 per cent increase.

This was the fastest rise in the KBA-housing price index since the second quarter of 2015, and represented an accumulated 13.05 percent increase since the first quarter of 2013.

Meanwhile the housing market is set to reap big from lenders’ appetite for loans and government policies as the country gets into the new interest rate capping regime.

Kenya bankers association CEO Habil Olaka said lower mortgage rates, tax incentives for low cost houses and credit rationing by lenders will all favour development of the industry that has defied growth even as the construction sector booms.

The government, which backed the law capping interest rates, has also reduced corporate tax on the construction of at least 400 low-cost residential units annually from 30 per cent to 15 per cent.

Mr. Olaka said lenders will concentrate on the housing market with offers for secured lending even as the costs of mortgages fall in line with the interest cap law.

“one of the things we pointed out is that banks will have to do credit rationing away from high risk loans and houses being low risk with secured collateral will see an increase in funding,” he said when he released the KBA housing price index yesterday.

Mr. Olaka said the unit prices will reduce, sending up the demand for mortgages and loans to take up homes under development.

“Both scenarios will boost the housing markets from a lender’s perspective. Given the size of the population, mortgage uptake has been on the lower side, but we now expect to see an uptake commensurate to our population size,” he said.

Kenya remains a low mortgage market with a total of 24,458 accounts in December last year, up from 22,013 in December 2014, even with more Kenyans having more disposable income to invest in their dream homes.

This has been blamed on high mortgage lending rates, which on average, over the last two years, have risen from 15.8 per cent in 2014 to 17.1 per cent last year on average, according to the central bank of Kenya.

In 2015, the rate ranged between 11.9 per cent and 23.0 per cent as compared to between 8.0 per cent and 21.3 per cent in 2014.

CBK noted that home owners were adapting and had moved to hedge their bets on a fixed rate rather than get exposed to interest rate fluctuations.

“About 89.3 per cent of mortgage loans were on variable interest rates basis in 2015 compared to 92.5 per cent in 2014,” says CBK says in the 2015 banking supervision report.