Effects of Demand Side Factors on Mortgage Uptake in the Real Estate Market in Nairobi County

Abstract

The mortgage market in Kenya has developed rapidly over the last ten years in terms of the number and the value of loans. It has been ranked as the third most developed within sub Saharan Africa, after Namibia and South Africa. The study sought to answer the research question: What are the effects of demand side factors on the uptake of mortgage in the real estate market in Nairobi County? Descriptive research design was adopted in this study; the target population constituted all the 26,187 outstanding mortgage loans holders in Nairobi County as at December 2017. Out of these, 394 mortgage loan holders were surveyed. Primary data was collected using a semi structured questionnaire. Data analysis was done using Charts and Tables. Descriptive analysis entailed computation of the mean and standard deviation for the scores on various indicators. Regression analysis was done and significance of the beta factors interpreted at 5% level of significance. The operations were done using Statistical Package for Social Sciences, version 20. The study established that a unit change in customer knowledge would lead to increase in mortgage uptake by a factor of 0.237, representing 23.7%; unit change in customer profile and income would lead to increase in competitive advantage by a factor of 0.231, representing 23.1%. A unit change in cognitive limitations would lead to increase in mortgage uptake by a factor of 0.239, representing 23.9%. At 5% level of significance, demand side factors were each found to significantly influence mortgage uptake. Based on the findings, the study recommends that an in-depth study should be done on challenges facing the uptake or mortgage products, more so in the low income market segments. The study also recommends that the influence of moderating and mediating factors should be examined, since that was not within the scope of the current study.The study recommends that the academics in the field of Finance, should consider using the empirical evidence adduced to further their research interests. Theorists should also consider the findings of this study to find further empirical foundation in light of the effect of demand side factors on mortgage uptake in Nairobi County. By so doing, further studies in other contexts, including public, private, manufacturing, and service would develop. The study further recommends the findings for the development of policies that would be geared towards increasing the sustainability of the real estate industry. The Ministry of Housing in Kenya should apply the study results in decision making since it would assist in developing well-informed policies geared towards the achievement of the Vision 2030, the Big Four agenda (more so on the affordable housing pillar), and the sustainable development goals in Kenya. Finally, the study recommends that the top management team of the individual commercial banks that deal in mortgage finance should use the findings for guidance in making necessary changes in their various functional units to enable them enhance their competitiveness. Specifically, because the study findings have drawn important lessons for success and best practices for the banking industry sustainability against the backdrop of interest rate capping in Kenya.