The effect of macro – economic factors on the development of real estate sector in Kenya

Abstract

This study assessed the effect of the macro - economic factors on the development of the real estate sector in Kenya. The objective of the study was to determine the effect of the the macro - economic factors on the development of the real estate sector in Kenya. The study employed a descriptive research design. Secondary data was collected from the websites of Central Bank of Kenya, Kenya National Bureau of Statistics and reports from Hass Consultants (a real estate firm) for the quarterly periods between 2007 – 2016. Data was presented using tables and graphs. The study applied a multiple regression model to establish the relationship between the independent and dependent variables. Diagnostic tests were conducted on the data collected to determine if they were suitable for multiple linear regression. The study used the regression coefficients to test the magnitude of the dependent variable to the macro-economic factors: inflation rate, interest rate, money supply growth rate and GDP growth rate and control factors: capital and credit growth rate. The coefficients that corresponded to inflation rate, GDP growth rate, Capital and Credit growth rate were positive indicating a positive relationship between them and the development of the real estate sector in Kenya while the coefficients of interest and money supply growth rate were negative indicating a negative relationship between them and the development of the real estate sector in Kenya. It was concluded that GDP and capital had a significant influence on the development of the real estate sector while inflation rate, interest rate, money supply growth rate and credit growth rate had an insignificant influence on the real estate sector. Kenya faces a great housing shortage therefore, the development of the real estate sector is vital for the success of the economy. It was noted that the macroeconomic factors fluctuated across the period thus affecting the development of the real estate sector. These factors also have an influence on the stability and efficiency in the economy. It is recommended that policy makers control the fluctuations of the macroeconomic factors by formulating various monetary and fiscal policies that will moderate the volatility being experienced in the economy.