Effect of Real Estate Prices on the Performance of the Kenyan Economy

Abstract

The real estate sector is vital to any nation intending to provide the structures for amble working places and residential places as it works towards improving the nations GDP. Real state sector is however composed of different players which makes it challenging for the buyers to get the real property pricing. The sector also encompases other sectors of the economy including the financial institutions, private sector and land brokers. This study sought to determine the effect of real estate prices on the performance of the Kenyan economy. The study used a descriptive research design. This study purely relied on secondary data. Secondary data on real estate values and prices was be obtained from Hassconsult quarterly reports. Data on real GDP, interest rates, exchange rates, money supply accessed from CBK and KNBS reports covering 10 years 2007-2016. Multiple linear regression for analyzing data as well as use of SPSS. Study findings found a positive and statistically significant association linking residential property index (RPI) and the real GDP. The results also found a positive and significant relationship between inflation (CPI), money supply (M3) and the real GDP but an insignificant negative association linking interest rates (INT) and the real GDP. The results also obtained that the correlation linking exchange rates and real GDP is direct but insignificant. The study concludes that residential property index (RPI), inflation (CPI), money supply (M3) have a significant effect on economic performance in Kenya. This study recommends that the government and policy institutions concerned with housing should develop strategic policies to improving housing since it significantly affects economic performance in Kenya.