Kenyans wishing to own a home are expected to part way with more money in 2023 following financial implications in the construction industry.
In a report by the Architects Association of Kenya (AAK), house prices are expected to rise due to the ongoing Russia/ Ukraine conflict and the rising fuel cost.
In their 2022 Status of the Built Environment Report, architects detailed that the conflict had affected the supply of key construction materials such as steel.
Owing to the challenge, many factories in the two countries closed shop or reduced their production, limiting the building materials in the market.
On the other hand, shipping companies also limited their exportation activities in the two countries.
Prices spiked because there was a limited supply of the materials and a high demand for the same in the construction industry. AAK noted that there was still uncertainty about when the conflict would end.
The price of steel increased by 29.5 per cent in January 2023, as per the New York Stock exchange. The report estimates that construction cost currently is at Ksh34,650 - Ksh77,000 per square meter.
"Prices and availability of essential construction materials like steel, paint, aluminium, cement and PVC remain unreliable in Kenya. The average price of a 50kg cement bag was Ksh550 as of June 2021 compared to Ksh650 in June 2022.
"Locally, a kilo of steel rose from Ksh100 to Ksh180 in 2022. Russia- Ukraine conflict accounted for the majority increase in steel prices in Kenya and globally," read the report in part.
Another key building material whose prices had risen was paint. This resulted from the 10 per cent excise tax imported on resin and the 16 per cent Value Added Tax (VAT) on petroleum-based ingredients used by manufacturers.
Consequently, given the changes in prices, architects also projected delays in the completion of housing projects owing to changes in the prices of materials.
"It is estimated that construction projects will continue to suffer from higher production costs, delays, and labour shortages.
"This is seriously harming parties’ legal duties under construction contracts and fundamentally changing the financial terms of previous contracts," read the statement in part.
Fuel
The high fuel costs are also set to increase the cost of construction as vehicles are used to transport materials from the hardware to the sites.
As per the prices released by The Energy and Petroleum Regulatory Authority (EPRA) on February 14, super petrol is set to retail at Ksh177.3 per litre for the next month.
Diesel and Kerosene will retail at Ksh162 and Ksh145.95 per litre, respectively.
