Effect of financial liberalisation on real estate prices in Kenya
Waini, Paul M
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The study sought to establish the effect or financial liberalization on real estate prices in Kenya. Specifically, the study sought to establish the effect of Central Bank Rate (CBR), Commercial Bank Lending Rate, and Inflation Rates on Real Estate Prices in Kenya. The study followed a descriptive research design and used secondary data. The study used average annual secondary data for the periodbetween 2000 – 2013. The independent variables CBR, Interest Rate, and Inflation were obtained from CBK website, while the Real Estate Prices were obtained from Hass Consult. The study used excels spread sheets to organize the data and SPSS version 20 to analyse the data. The study established that the study variables fluctuated throughout the period. Also, the study established that Real Estate Prices grew each year since 2000 to 2013 with growth spurts during the 2001/2002 (19.91%) and 2008/2009 (20.90%). Regression analysis results revealed that there is a strong positive relationship between the independent variables (CBR, Commercial Bank Lending Rates, and Inflation Rate) with Coefficient of determination (R=0.816), but the independent variables would explain 56.6% of the change in Real estate prices (R Square =0.566); hence 43.4% of change in real estate prices is caused by other factors. Further, with a p-value equal to 0.009 the results implied that the regression model was significant in predicting the relationship between Real Estate Prices and the predictor variables as it was less than α=0.05. However, F-table tabulated at F14; 3; 0.05 was 8.74 which was greater that F= 6.661 determined through analysis depicting that the model was insignificant.The study concludes that a change in CBR causes the highest influence on real estate prices followed by the inflation rates since the coefficient corresponding to Central bank rate (CBR) was statistically significant (p-value was 0.001), while Commercial Bank Lending Rate and Inflation Rate were statistically insignificant as depicted by P-Values equal to 0.756 and 0.448 respectively. The study recommends that policy makers and regulators should enact and uphold rules that ensure that real estate prices remain affordable for the citizenry. Also, CBR should be regulated very cautiously because its corresponding correspondent was statistically significant while those corresponding to lending rates and inflation rates were statistically insignificant. Also, the study recommends that future studies should be conducted to find out the relevant regulatory and policy issues that should be developed and employed by regulatory policy makers in order to appropriately guide financial liberalization in the country. Moreover, future studies could include more variables that affect the real estate prices. Also, future studies may consider cross-economy comparisons.
CitationMaster of science in finance
University of Nairobi