Factors Influencing Demand and Supply of Real Estate Property in Nairobi County, Kenya: a Case Of Erdemann Property Limited

Abstract

Nowadays, rapid increase in population, immense migration of people to urban centers and industrialization has forced the government and realtors to rethink on ways to fulfill the increased demand for real estate properties especially in urban areas. However, most governments have participated minimally in this sector leaving the private sector to dominate the industry despite demand being high while supply is low. In Kenya, investment in real estate has been a major sector that is attracting many potential investors contributing to 12% of GDP. Real estate property market has been booming in Kenya in the past decade and it continues to boom. However, demand and supply for real properties continues to pose a great challenge in the country particularly in urban towns due to urbanization. The high demand for housing against a background of limited supply has resulted into deplorable shelter conditions. The purpose of this study is to establish the influence of demand and supply of real estate property in Nairobi County, Kenya, with focus to Erdemann Property Limited. The study was guided by the following specific objectives, that is, to establish how price, economic situation, land availability and demographic profile influences demand and supply of real estate property in Nairobi County. This study employed descriptive research design. The target population of this study was managers working at Erdemann Property Limited in Nairobi County. Simple random sampling technique was used to select 8 respondents. The study relied mostly on primary data sources where self-administered questionnaire was utilized as source of data. Data collected for this study was purely quantitative. Quantitative data was coded and entered into Statistical Packages for Social Scientists (SPSS Version 17.0) and MS. Excel and analyzed using descriptive statistics. The finding was presented in form of frequency tables and explanation is presented in prose. The knowledge established from this study is useful in helping the regulatory authorities and real estate developers to formulate future policies aiming at meeting demand of the real estate property. The study concluded that competition for limited key resources and sharp increases in the price of some building materials has led to high costs of housing. High cost of land in areas profiled as prime areas hinders real estate developers to meet the demand of affordable housing in such areas. Property taxes, property insurance, mortgage fee and insurance, regular maintenance and sporadic upgrades, higher utilities limit the demand and supply of real estate property. Finally, the study concludes that increased demand for real estate property in most urban areas leads to building more housing developments and accelerated growth in supply of property in that area. The study recommends that the government should regulate the real estate market and since demand is expected to keep on increasing; persistent regulatory restrictions on land supply or how intensively land can be used should be put in place. The government should put in place measures to check house price inflation and rental inflation which can deviate when supply of new housing is slow to respond to changes in market conditions. The National and County governments should have master plans and zone the city bearing in mind the needs for housing for its occupants. The county government should amend the available planning laws in order to allow construction of more buildings in the study area.