House prices are on the rise after a long period of subdued prices, this is according to a new survey done by the Kenya Bankers Association (KBA).
The association’s survey notes that House Price Index, prices rose by 0.22% in quarter four of 2020, from a 0.08% contraction in the previous quarter, signalling stabilising market prices, which largely reflect an outcome of the demand and supply dynamics in the market. However, on the supply side, housing remains largely fixed, with adjustment to meet demand being gradual rather than immediate.
“Unlike in previous quarters where variation in house prices was mainly driven by structural factors, particularly the size of the plinth area, house prices in the fourth quarter of 2020 were largely driven by regional differences. This is an indication that location is now playing a pivotal role,” said KBA Chief Executive Officer Habil Olaka.
The rise in prices
With depressed credit to the construction and real estate sector, an under-supply of new units has triggered the rise with most sales in the period being on the already completed units from the previous periods. The rise in prices was also compounded by homeowners’ preferences for newer buildings.
KBA Research and Policy Director, Samuel Tiriongo, indicated that while house prices rose faster with an increase in the area, number of bedrooms, number of floors, they remained relatively lower for older units.
“By house type, our analysis also reveals that prices for apartments rose faster than those of bungalows and townhouses, but were slower than those of maisonettes, reflecting emerging preferences for apartments over other house types due to their relatively lower cost of development per unit,” said Director Tirongo.
Total units sold in the quarter rose by more than five times to 314 from 57 in quarter three of 2020, reflecting in an increase in transactions on apartments and maisonettes that rose nine times and four times, respectively. Moreover, house type distribution across the regions was heterogeneous. For instance, apartments accounted for 26.7% in region 1, 42.9% in Region 2, and 1.9% in Region 3.
Region 1 includes Athi River, Mlolongo, Mavoko,Nakuru, Ngong, Ruaka,Syokimau, Embakasi, Kahawa Wendani, Thika, Mtwapa, Utange,Kitengela, Kiembeni, Nyeri, Likoni,Eldoret, Ruiru, Kilifi,Thika road (Kasarani, Roysambu, Ruaraka),Meru, Bungoma.
Thindigua (Kiambu Road),Kiambu, South B, South C,Kabete, Komarock, Imara Daima,Membley, Buruburu, Rongai,Waiyaki Way (Uthiru, Regen,Kinoo, Kikuyu), Mbagathi road,Ngong Road, Langata fall in region 2.
While region 3 includes Kileleshwa, Kilimani, Lavington,Westlands, Spring Valley,Riverside, Milimani (Kisumu),Milimani (Nakuru), Runda,Karen, Garden Estate, Parklands,Ridgeways, Muthaiga, Loresho,Kitisuru, Adams Arcade, Nyali,Mountain View, Nyari.
Across the regions, housing transactions were predominant in Regions 1 and 2 compared to Region 3, indicating buyer’s preferences and affordability characteristics. The number of transactions on bungalows remained largely unchanged over the period. Apartments accounted for 71% and maisonettes took up 23%, while bungalows reflected much lower activity of 4%. The distribution of transactions by house type across the regions was also uneven.