The demand for affordable homes in Kenya has dropped, with the Kenya Bankers Association (KBA) attributing the dip to inflationary pressures both locally and globally.
KBA in a recent survey indicated that the dwindling demand for home acquisition was also witnessed in other East African countries.
Inflation, KBA says, has also affected consumer incomes taking a toll on the investments channelled towards acquiring homes in the country.
Punitive taxation regimes, land laws, restrictive compliance, listing costs, and other government policies also affected the developers' efforts to promote investments in the property market through Real Estate Investment Trusts (Reits).
"The steady decline in house prices broadly reflects the headwinds in the economy that influenced both demand and supply characteristics of the market," the Kenya Bankers Association survey stated.
Prospective homeowners are also wary of the outcome of the August 9 General Election which was listed among the factors that have slowed down the acquisition of affordable homes in the country.
Most consumers postponed purchases, arguing that they would revisit their investment plans after the August 9 polls.
The survey corroborated the data released by the Central Bank of Kenya (CBK) detailing that the number of mortgage loans declined to 26,723 from 26,971 in December 2020 mainly due to a higher number of mortgage loans that were repaid compared to the number of new mortgage loans granted in the year.
CBK noted that the outstanding value of non-performing mortgage loans increased to Ksh28.3 billion from Ksh 27.8 billion, impacted by the pandemic and low levels of income.
The sharp decline in the acquisition of affordable homes mostly targeted residents from urban areas including Nairobi, Mombasa, Nakuru, Kisumu and Eldoret.
In Nairobi, the decline has been steady. According to Gladys Situma, Branch Manager at Fanaka Real Estate, the decline can be attributed to homeowners focusing on putting up small houses for rentals, rather than detached houses that are a favourite of many homeowners.
Developers are inclined towards building single rooms, bedsitters, and one-bedroomed houses. This forces investors to focus on purchasing land to undertake their own construction projects.
"As you have noticed, satellite towns are rising and this can be witnessed through the HassConsult which has pinpointed Ruaka, Kamakis, and others such as Kitengela and Juja. Most landlords concentrate on building smaller houses because of high land rates in suburbs and towns.
“In satellite areas, the land is affordable and people are moving towards settling there early for various reasons, from seeking their own space to enjoying infrastructure. We have witnessed an influx of land buyers in the recent past months,” Situma told Kenyans.co.ke in a past interview.
In another separate report, HassConsult, a real estate firm, noted that the reduced demand is due to uncertainty surrounding the present infrastructure in the city and whether it will be able to support the new developments.
"Suburb continues to cool as investors go slow on the area due to uncertainty on whether the present infrastructure will support the new wave of developments the area is now attracting, thus weakening its appeal," HassConsult Head of Development Consulting and Research, Sakina Hassanali.
The demand has however been projected to peak in 2023 after the hit of elections cools down.
