Effects of Money Supply on Residential Real Estate Pricing in Nairobi County.

Abstract

Residential properties are properties that serve as housing or a dwelling and encompass single-family, duplexes and other multi-family homes. It is known to have a dramatic multiplier effect and is a key economic indicator. The real estate market has experienced significant growth in the last decade w ith many countries experiencing house price fluctuations. The Kenyan real estate market has been experiencing a boom in the past ten years and the latest findings have shown that the trend will continue into the foreseeable future. In Nairobi real estate industry has played a key role in the growth of the economy due to its high multiplier effect through increased investments in production and marketing of building materials, employment generation and wealth creation. In Nairobi real estate market, little has been done to check the set of forces behind the housing prices. As such the study sought to investigate the effects of money supply on residential real estate prices in Nairobi. In this study a quantitative approach was followed. The researcher used data for the main players in the financial sectors which are mainly concerned with the regulation of the real estate industry. The study used secondary data which were largely quantitative and descriptive in nature. Data analysis was carried out by use of simple mean, standard deviations, percentages, regression and correlation analysis by use of Statistical Package for Social Sciences (SPSS) Version 22. A multivariate regression model showing the relationship between residential real estate prices and various variables was tested. The study found that the level of money in supply and GDP growth rate have significant negative relationship with the growth in real estate prices. We also observed that real estate prices growth rate has positive relationships with inflation and Commercial Bank lending rates. Further, the trend also indicates an overall increase in property prices with time hence the real estate market in Kenya is expected to continue to grow. Even without significant changes in the variables, the effect of time is that house prices increase. This also indicates that the real estate market is significantly stable.