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Kenyan House Prices Gradually Crawling out of the Red

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House prices are still in the negative territory albeit with a trend that signals stabilization following a sharp reduction seen in 2019.

According to the Kenya Bankers Association – House Price Index (KBA-HPI), house prices contracted by 0.20 percent in the second quarter of 2020, marginally reversing the deceleration from the 0.51 percent contraction in the first quarter of 2020.

The stagnation of house prices at negative territory broadly reflects the headwinds in the economy that have influenced both demand and supply characteristics of the market.

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With demand remaining depressed, the concluded sales during the second quarter of the year represented a nearly 40 percent drop from the previous quarter.

Even with muted demand on the back of a weak economy, the index reveals that the change in house prices was not drastic, partly because of the downward stickiness of prices, a characteristic of the housing market.

EABTAt the same time, the sharp correction in prices during 2019 engendered subdued investments thereby reflecting limited supply accompanying the low demand.

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The broader construction and real estate sector, while showing growth during the first quarter of 2020, manifested the weaknesses in the broader economy with its expansion of 5.3 percent being 0.38 percentage points lower than a similar period last year.

The performance of the sector was on the back of some of the leading indicators remaining on the positive territory but still subdued. For instance, cement consumption (a supply-side proxy) continued to grow.

Nonetheless, cement consumption was linked more to other public sector-oriented construction projects than to housing.

The sector received mild demand support through the growth in credit although with the growth remaining sub-optimal.

On the back of the outlined broader developments in the sector, there was a decline in the importation of construction materials mainly fabricated metal products and cement.

The effect of the decline on the property development is anticipated to come with a lag, and its out turn can only be evident in subsequent quarters.

In quarter two of 2020, based on the moving base index, the KBA-HPI stood at 117.20 compared to 117.44 in the quarter one of 2020.

The fixed base index stood at 106.66 in quarter two from 106.87 percent in quarter one of 2020.

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