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Kenya- House developers forced to lower their asking prices due to glut

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NAIROBI, KENYA: Kenya’s real estate market is showing signs of cooling down after years of record growth as jitters over the August 8 General Election and the interest rate cap introduced last year eat into investors’ earnings. Data from several housing indices released in the past month show growth in property prices across the country has slowed for the fourth consecutive quarter, with experts warning the trend is likely to persist over the short to medium term. According to the Kenya Bankers Association (KBA) Housing Index for the first quarter of 2017 released on Thursday, average house prices increased by 1.1 per cent, down from 1.58 per cent recorded in a similar period last year.“Whereas the supply and demand dynamics have had an equal influence on the house prices trend, the key driver of the softening seen during the first quarter of 2017 and the preceding two quarters leans more towards market demand conditions,” said KBA Director of Research and Policy Jared Osoro. KBA further said the cap on bank interest rates has made it difficult for both property developers and buyers and now wants the legislation reversed.

 Average prices “The momentum in the housing market is likely to slow in the future, partly due to credit constraint brought about by the Banking Amendment Bill 2016,” said Chief Executive Habil Olaka. “It is therefore vital for the Bill to be reviewed in a way that would minimise potential risks associated with the evolution of the financial cycle,” he added. Data from the Central Bank of Kenya shows the amount of credit to the building and construction sector remained stagnant at Sh104 billion for the period between September and December 2016. Property firm Hass Consult, which last week published its quarterly housing index, similarly indicated stagnant growth with declining values in some sub-sectors. “Apartments were the best performing asset class in the property market registering a 0.4 per cent growth in the quarter,” said Hass Consult Head of Development Sakina Hassanali. “Detached and semi-detached house prices recorded falls of 0.2 and 0.4 per cent respectively attributable to a wait-and-see approach from buyers as the elections approach,” she said. A report by investment firm Cytonn released last week also said a glut in commercial space is hurting occupancy rates, with landlords forced to reduce their asking prices by as much as 5.8 per cent.


by: Frankline Sunday, Standard Digital
15 May 2017
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