Kenyans seeking to buy or build houses will have it rough in coming days, a new report by Mizizi has revealed.
According to the survey released on Wednesday, July 20, the cost of acquiring land has spiked in the country, by more than 50 per cent.
Coupled with the high cost of building materials and loans, the situation will potentially have a spiral effect on the speed of developing affordable units.
“Capital Gains Tax has been reviewed up from 5 percent to 15 percent. This will eat into profits of those seeking to resell their properties once it comes into effect early 2023,” stated Mizizi Homes Africa Chief Executive Officer, George Mburu.
First-time homeowners will be the hardest hit due to skyrocketing prices of consumer goods that has caused low collection and a general slowdown on economic growth.
“Every aspect of housing cost has gone up. Consumer purchasing power is low due to high cost of living, taking a loan is much more expensive now, you require a lot more to start a construction project and there is also a new levy coming for those seeking to dispose off their properties,” added Mburu.
Mburu also likened the looming threat to the ongoing war between Russia and Ukraine, much of which has seen the cost of purchasing building materials go up.
The war entered its fifth month in July, in what could degenerate into a protracted period of feeble growth.
This, according to Mburu, has increased forex exchange volatility in the country with the Kenya Shilling continuing to weaken further against the US Dollar.
For the first time in seven years, the Central Bank of Kenya (CBK) in June raised the benchmark lending rate by 50 basis points to 7.5 per cent, signaling higher borrowing costs.
This will also hurt homeowners who wish to sell property for various reasons.
CBK move to increase lending rate was to tap breaks on the rising inflation rate.
A significant spike in cooking oil, wheat flour prices among other commodities since the start of the year also pushed up the country’s inflation rate over the ceiling of the Central Bank’s target range of 7.5 per cent for the first time since the country’s general elections. Kenya’s inflation rose to 7.9 percent in June.
“This has significantly eroded consumer purchasing power as most people struggle to balance higher daily expenditures as some break into their savings and others delay settling mortgages as others miss home installment payments,” remarked Mburu.