NAIROBI, Kenya, Aug 19 – The housing market remained depressed during the second quarter of 2019, says a new study by Kenya bankers association.
According to the Housing price index study, there was a 1.72 percent decline in house prices change during the second quarter compared to 2.78 percent decline in the previous quarter.
The study has attributed the decline to an interplay between weak demand and supply conditions on the back of limited credit.
Further, the supply side weaknesses can be inferred from reduction in the number of building approvals.
Between January and June 2019, there were 2,252 approvals compared to 2,238 approvals for the period between July and November 2018.
“This is an early sign of an emerging trend, considering that previous instances of negative prices have been followed by a correction in the subsequent quarter,” says the study.
The evident increase in sales during the second quarter compared to the first quarter is more a reflection of supply spill-overs than new units being put in the market.
On the overall the study says the housing market is expected to remain subdued, attributable to two factors:
“First, weak household income continues to keep demand for housing tight. Second, even with slight up-tick in private sector credit growth during the first half of the year, home buyers remain constrained,” says the study.
Further, the study says that credit constrains that affected both the supply and demand side of the housing market has been a dominant influence on the price evolution.
The limited availability of funding to the housing market has been on the back of increased levels of non-performing loans generally, and especially the construction sector.
This factor has had a negative bearing on the risk appetite of lenders.