NAIROBI (Xinhua) --
Kenya’s property market has over the
years experienced a fast rise in prices of both land and
houses amid low sale of some segments like office space,
leading to fears that the country is experiencing a
believe in a real estate over-expansion point to
phenomena including exorbitantly priced middle-income
estates and the big inventory of unsold houses.
lecturer Henry Wandera said that East African nation’s
real estate industry is in a bubble that is inflating.
four-bedroom houses in upper middle-income estates are
currently being rented out at 1,500 dollars a month. How
many people can afford that and for how long?” Wandera
these prices based on? I can confidently say greed and
speculation. The real estate sector is priced way above
itself and these are signs of a bubble,” he said.
With a good
number of malls having empty spaces and developers stuck
with houses that they have not sold for over two years,
Wandera said it may be just a matter of time before
prices fall drastically.
analysts have dismissed the fear, noting that the
sector, valued by the World Bank at about 9 billion U.S.
dollars, is still experiencing strong market demand.
is experiencing the normal real estate cycles as a
result of low supply and high demand. Real estate still
presents an attractive opportunities for investors,”
said Edwin Dande, the CEO of Cytonn, a Nairobi-based
investment firm, on Wednesday.
Dande, a bubble is characterized by factors including
more people taking debt, relaxed lending standards, high
level of speculation and incredible rise in prices.
today, the key constraint is access to credit as the
government is crowding out the private sector given the
2016 interests rate cap law. For instance, mortgage
accounts were reported to have decreased by 1.5 percent
by December 2016 to 24,085 from 24,458 the same period
in 2015,” said Dande in a report by Cytonn.
government capped interest rates at 4 percent above the
Central Bank rate, which currently stands at 10 percent.
instead of boosting access to credit, the move has
prompted banks and mortgage firms to tighten their
credit supply to the private sector, especially for
long-term loans such as mortgages.
as evidenced by the slowdown in private sector credit
growth, which stood at 2 percent in October compared to
4.6 percent in October 2016, and 19.5 percent in October
2015, there is no relaxed lending in Kenya especially in
the property market.
a real estate consultant with Avent Properties in
Nairobi, also dismissed the bubble claim, though
admitting that most developers are stuck with unsold
prices have remained a little static but this was only
because of the lengthy electioneering period as many
would-be buyers kept off the market due to the political
uncertainty,” he said.
Kenya has a
deficit of some 2 million housing units, with the
National Housing Corporation estimating an annual demand
of 200,000 units.
population growth means demand outstrips supply. Kenya’s
population continues to grow and urbanization rates are
4.4 percent, we can not therefore say there is a bubble
yet more and more people have no place to stay,” Dande
property market is mainly supported by the middle-class
population, which has continued to expand amid rising
income. Data from the Kenya National Bureau of
Statistics (KNBS) Economic Survey 2017 showed that wage
earnings increased to 16 billion dollars in 2016, up
from 14 billion dollars in 2015.
country’s GDP, according to the KNBS, averaged at 5.1
percent for the last five years. In 2017, it is expected
to average between 4.7 percent and 5.2 percent.