Supply-Demand Imbalances Sustain House Prices Decline Streak

Supply-Demand Imbalances Sustain House Prices Decline Streak

November 25, 2019 0 By mykenyancareers
HOUSES GREENPARK - Supply-Demand Imbalances Sustain House Prices Decline Streak
The sustained decline is an indication of an emerging trend where prices have transitioned from a continuous positive trend seen since the last quarter of 2014/FILE

NAIROBI, Kenya, Nov 25 – House prices remained in the negative territory during the third quarter of 2019, in what the latest Kenya Bankers Association House Price Index (KBA-HPI) has attributed to supply-demand imbalances, characterized by weaknesses in both the supply and demand side with a slant towards weaker demand.

In the period under review, house prices declined by 2.28 percent compared to the 1.72 percent decline reported in the previous quarter. The sustained decline, observes the KBA-HPI, is an indication of an emerging trend where prices have transitioned from a continuous positive trend seen since the last quarter of 2014.

“If the price softening is sustained into the last quarter of the year and going forward, it will be a pointer to a market correction that comes after a long streak of house price increases,’’ the Index notes, indicating that house prices in the third quarter were sensitive to the size of the house, location and amenities in a trend underpinned by a supply-demand imbalance.

On the supply-side, the 25 percent increase in housing units transacted during the quarter were largely a reflection of supply-spill overs from the second quarter rather than new properties entering the market, considering that the supply-side of the market has been characterized by a slump in approvals of housing plans, a decline in cement production and consumption, with muted growth in advances to building and construction sector compounding the tapering off momentum.

“Demand side factors that explain the subdued outlook include a clear disconnect between the overall output growth in the economy and effective demand by potential homeowners. Secondly, the tight credit conditions that have seen a decline in advances to households has adversely influenced their ability to access appropriate resources toward home ownership. Lastly, households’ disposable incomes remain constrained,’’ said KBA Research and Policy Director Jared Osoro.

Apartments continued to dominate buyer preferences in the housing market, suggesting predominance of the middle-income segment of the population.

The KBA-HPI inter-quarter sub-regional findings show significant downside price movements, with apartments in Thindigua, Kiambu, South B, South C, Kabete, Komarock, Imara Daima, Membley, Buruburu, Rongai, Waiyaki Way (Uthiru, Regen, Kinoo, Kikuyu), Mbagathi road, Ngong Road, Langata  registering the highest decline.

This is in comparison to apartments in 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 which also registered price appreciations for bungalows.