Sluggish uptake of loans leads to lower house ownership

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By Regina Manyara

House prices grew at a slower pace between October and December last year due to sluggish uptake of loans as a result of the capping of interest rates.

The latest Kenya Bankers Association Housing Price Index indicates that the capping of interest rates last October saw banks apply more scrutiny before approval of loans while potential real estate customers adopted a wait and see approach before buying.

This saw house prices increase by 1.58 percent in the fourth quarter of 2016 as compared to 2.2 percent in the previous quarter.

The Banking Amendment Act 2016 came into effect in October resulting to depressed loans as bankers applied more scrutiny before approving credit requests.

This affected the real estate sector that witnessed subdued demand for housing units.

Between October and December 2016, demand for housing units on average increased by 1.58 percent, which was the slowest growth reported since April last year.

Increasing demand for decent housing in the low end market did not influence a shift in supply as most real estate investors increased their portfolios in the high end areas hence the rise in the number of gated communities.

Availability of resources such as water, infrastructure and security continued to influence the demand and supply chain in the real estate sector.

Apartments accounted for 60 percent of the units sold during the quarter compared to 23 percent for massionettes and 17 percent for bungalows.

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Beth Nyaga is an Online Content Editor with more than 5 years experience working for the main stream media and PR companies. She holds a Bachelor of Journalism and Media Studies (Major in Public Relations) from the University of Nairobi. She loves telling stories through her words.