An Analysis of Financial Investment Determinants in the Kenyan Retail Property Market

Abstract

The Kenyan Retail property sector has experienced considerable growth subsequently becoming the fourth largest contributor to the economy. Recent market analysis indicates that apart from local and foreign investors, institutions such as asset management companies and mutual funds are venturing into the lucrative industry. Investors in the sector have been able to reap high average rental yield hence the rising popularity of development of mega retail complexes among high net worth investors. The study investigated financial investment factors that affect investment in the Kenyan retail property sector. Financial variables selected for the study were interest rates, inflation, GDP growth and land prices. The study implemented quantitative descriptive research design. The study conducted a population study of the Kenyan retail property sector development. Secondary data on retail market indices were sourced from annual reports by market analysts such as Cytonn research, Hass consultants and Knight Frank. Data was analysed and summarized using excel spread sheets and statistical package for social sciences. The findings of the analysis indicated a fairly strong correlation between the selected financial variables and retail property investments. The findings also established that GDP growth has a direct and proportional effect on retail property investments. Interest rates exhibited a statistically significant negative relationship with retail property investments. Similarly, average annual inflation rates have an inverse relationship to retail property investments. In addition though the significance level is marginal land price indices indicated a negative relationship to retail property investment that was noted to be less than proportional. Test of significance indicated that the model was statistically significant in predicting the relationship between retail property growth and the predictor variables. The recommendations of the study highlighted that monetary policy measures should be geared towards economic stimulus. Likewise fiscal policies should be aimed at reducing taxation or subsidizing the property market industry and increasing spending on economic incentives to ensure continuous and sustainable development in the retail sector.