May 3, 2019 Real Estate

Kenya’s real estate sector slowed down in the third quarter of 2018.This weak pace in real estate, could be attributed to declining demand for homes amid increased supply of new housing units.

Latest figures from the Kenya National Bureau of Statistics, covering July to September 2018, indicate that the property sector posted a growth of 5.8 per cent – its slowest rate since the 5.4 per cent recorded in the last quarter of 2014.

Weak  demand for real estate, saw  some builders  offer huge promotions to entice buyers, including freebies. This also saw developers make their payment plans more flexible to accommodate buyers with diverse financial needs. In trying to attract clients, some developers went to the extent of slashing prices to as much as 20 per cent, angering earlier buyers who had  paid higher prices. An example of developers who have slashed prices is HFC, who through their shika nyumba na HF promotion, are enticing clients to buy their houses which are 30% discounted.

Market analysts blame the slowdown on low access to credit from banks due to the interest capping, uncertainties in building approval laws from national and  county governments, and a weakening purchasing power among potential buyers. Some analyst further blame the slagging state due to oversupply of real estate in some segments like in the high end market segment. This in turn creates a buyers market who control the prices in the market.

According to  Jared Osoro, the director of research and policy at Kenya Bankers Association, subdued demand for housing among the middle-and high income earners has made it difficult for investors to repay their bank loans.

The Central Bank of Kenya’s Quarterly Economic Review released in December 2018, shows that real estate recorded the highest growth in non-performing loans in three months ended June, a situation that has seen a spike in the asset seizures by aggressive lenders. Non-performing loans in the sector rose by Sh6.1 billion, or 15.8 percent in April-June to Sh44.4 billion compared to the previous quarter as developers outpaced manufacturers (11.7 percent) and traders (7.3 percent) in growth of default on loans, the CBK said. This means that 11.3 percent of the Sh392.7 billion gross loans extended to investors in land and houses by commercial banks over the years were not being serviced as at the end of June. A loan is considered non-performing if it remains unserviced for more than three months.

As a result of financial difficulties, many investors have lost their properties to creditors – leading to a glut of reposed homes that are being sold off cheaply across the country.

The slowdown has negatively impacted the local construction industry where cement consumption for the 10 months to October 2018 declined 6.4 per cent to 4.129 million metric tonnes compared to a similar period in 2017.

Follow the link below, to get an insight of how the real estate prices has been performing in various towns.

Enjoy the read!!

Leave A Comment