House prices maintained a generally stable outlook according to the latest Kenya Bankers Association (KBA) Housing Price Index for the third quarter of 2018. KBA however revealed that house prices showed signs of softening. According to the index which is published quarterly, house prices increased by 1.35 percent for the quarter, representing a 0.41 percent decline from the 1.76 percent rise during the second quarter of 2018.
A rise in investments in the housing sector has resulted in greater supply in the market which has led to subdued demand. However, the market is still in need of investments in lower-income housing since most of the investments so far, have been geared towards the middle and high income segments.
The index points to overall stability in house prices following the marginal changes to the House Price Index which has remained under one percent. The market is largely demand driven and therefore, sensitive to changes or anticipated changes in supply. Thus with the government beginning to supply more affordable housing over the next few years, there’s likely to be a softening in the prices of houses.
In addition, with government backing and incentives, developers and financiers are likely to jump the boat owing to a reduction perceived risk.
According to the index, house prices increased by 1.35 percent, a 0.41 percent decline from the 1.76 percent rise experienced during the second quarter of 2018. The movement in house prices has seen a reversal since the fourth quarter of 2017 when prices took an upward trend up to the end of the first quarter of 2018. House prices have since declined from quarter one to the third quarter of the year.
However, the drivers of house price movements in the third quarter of 2018 remained unchanged from those of the previous three quarters, a signal for the consistency in home ownership preference across the market. The interaction of supply and demand dynamics saw home owners preferences tilt towards bungalows accounting for 38%, apartments accounted for 35% and maisonettes accounted for 27% of total units offered in the market.
The changes, which were in contrast to the previous quarter when apartments were the most dominant offer, indicate the rapid changes in owner preferences. Developers, will do well to take this into account. The KBA House Price Index has risen from 121.29 in quarter one this year to 123.42 in quarter three.