Nairobi, January — The average house prices in Kenya reflected a sense of stability rising by a mild 1.14 per cent in quarter four of 2015 compared to 1.25 per cent in quarter three of 2015, according to the Kenya Bankers Association – Housing Price Index (KBA-HPI). This mild price change reflects the gradual increase in house prices over time. For instance, over the last three years the average house prices have increased by 8.19 per cent. This was the third successive quarter that this measure has been below 2.0%, indicating a possible softening in the underlying rate of price change.
Consistent with the previous three quarter, the main price drivers for quarter four 2015 were the size of the house (as measured by plinth area, number of bedroom, bathroom, presence of domestic staff quarter and master ensuite), whether or not the house is located in a gated community (which comes with superior ambience environment, controlled development, security, privacy and scenic value that comes with them), and proximity to social amenities such as shopping malls, tarmacked roads, schools, hospitals and presence of parking lot among others.
A disaggregation of the index by house type indicates that apartments accounted for 93 per cent of the total number of houses offered in the market with maisonettes coming second at 6 per cent and bungalows accounting the rest. This underpins the increased appetite for apartments, which are relatively affordable among the apparently growing middle class. From the real estate developers’ point of view, apartments could be yielding high returns given that a number of units that can be put up in a small piece of land as opposed to maisonettes and bungalows which have to be stand alone.
According to KBA Director of Research and Policy, Jared Osoro, the KBA-HPI regions are based on clustered price ranges across several counties and the have substantially rose overtime as compared to region one and region two. “The sub regional indices indicate that the prices of all the house types in the all the three regions seem to be on a gradual upward trend. However, the analysis based on both fixed base and moving base show that price is more pronounced in region three than in region two and region one”, said Mr. Osoro.
While the house prices are clearly softening as shown by the KBA-HPI over the past three quarters when the rise has been under 2 per cent, the upward trend that has been sustained over the past three years is a reflection of the limited volatility in this segment of the construction sector. The fact that the prices have risen by single digit since the first quarter of 2013 – the base period for the KBA-HPI – signals limited price-related risks.
To better guide policy makers and investors on the trends in the housing sector, the banking industry’s umbrella body, the KBA, launched the KBA-HPI in February 2015. The Index has quickly been recognised as a credible analytical tool that is useful for tracking housing sector dynamics and price movements.
“Our intention is to provide the market with an improved analytical tool that is useful for tracking the housing sector based on both qualitative and quantitative characteristics that underpin price movements,” said KBA Chief Executive Officer, Habil Olaka.