The past twelve months have seen some homeowners lose their investments to auctioneers as banks moved to maintain a proper grip on deteriorating loan books.
While developers have been hit by a downward onslaught on property prices as a result of low demand, other investors are suffering the effects of a subdued economic environment characterized by job losses and disruptions.
According to the Kenya Bankers Association’s latest House Price Index release, house prices maintained a downward trend in the fourth quarter of 2019, pointing to an overall softening of demand in the housing market.
The decline has been driven by tight credit market conditions on the back of increased non-performing loans in the real estate and construction sectors.
The research says house prices decreased by 0.61 percent compared to the 2.28 percent decline that was reported in the previous quarter.
In addition, the findings show that rising distressed properties overhang continues to have a bearing on house prices, shaping market expectations and causing dealers to align by reducing their asking prices.
“This negative feedback loop has clouded the house market outlook and led to price rediscovery in favor of a downward correction,” said KBA Director of Research and Policy on Financial Markets Mr. Jared Osoro
He said the housing markets are seeing a sustained five-year market correction but with certain areas experiencing modest price increases.
The index revealed that homeowners’ preferences remained skewed to apartments at 74 percent. Preference for maisonettes rose from 10 percent in the past quarter to 17 percent, while bungalows had a preference rate of 9 percent.
“At the top end of the market, there has been a run for apartments with the activity in the upmarket and middle-income markets muted as price correction trend continues,” said KBA.
Following the negative market sentiment in recent months, it is not yet clear how long it will take for the dust to settle.