| dc.description.abstract | In Kenya, interest rates are making mortgages even more unaffordable but demand for
housing continues to outstrip supply. “Every six months or so, Kenya’s top mortgage
financiers, organize bus tours of Nairobi’s developments. Participants stream onto buses
that drive out to the developing zones of Nairobi. Such has been the pace of property
development that some of the blocks of flats, townhouses and bungalows are still only
served by undeveloped infrastructure like dirt roads.” Inflation which is a great
determinant of interest rates has been a major challenge in the Kenyan economy. The
inflation rate in Kenya was recorded at 6.67 percent in August of 2013. The rate averaged
11.67 Percent from 2005 until 2013, reaching an all-time high of 31.50 Percent in May of
2008 and a record low of 3.18 Percent in October of 2010. The objective of this study
was to establish the effect of interest rates on real estate prices in Kenya. Descriptive
study was undertaken. The population of this study consisted of all properties–standalone
house/bungalows/cottages/villas, town houses/maisonettes and apartment constituted in
the Hass Property Index. This study adapted a census study of all the properties in the
Hass Property Index. Secondary data collection technique was employed, and was done
through the analysis of data from the Hass Property Index and from the Central Bank of
Kenya Monetary Policy Committee data base, all of which is publicly available. A simple
regression model analysis was used. The study concluded that interest rates do influence
real estate price in the Kenyan market. Average house prices had been on the rise for the
8 year period to 2012 and the lowest value for house prices was 15,070,019.00 in years
2009 and 2006 while the highest was 27,132,758.8767 in 2012. The study also concluded
that the lowest interest rate value was 2.77 in 2011 while the highest was 18.52 in 2012.
The study recommends that the Government should provide an enabling environment for
higher economic growth rates so as to “put” more money into more pockets and ensure
more people can afford mortgages/homes. | |
