KENYA’S HOUSING MARKET STRUGGLING THANKS TO INTEREST CAP

Kenya's housing market has been weighed down following the nation’s economic slowdown and a recent interest rate cap.

Recent data from the Kenya Bankers Association shows a 0.42% increase in house prices during the third quarter of 2017, down from 0.98% the previous quarter, thanks to the interest rate cap introduced last year, as well as due to political uncertainty across the nation.

"This is an indication that there is no relief for the declining trend in the rate of house price increases since the third quarter of 2015," says KBA Director Jared Osoro.

Last year the Banking Amendment Act set a lending interest rate ceiling of 4% above the Central Bank rate – which has been at 10% since a year ago. Fitch Ratings said in a recent report that the law was having an adverse impact on private sector lending.

“We expect new lending to remain subdued as long as the rate cap remains in place,” adds Osoro. “Households relying on the credit market for home acquisition have been adversely affected. “Given the current political uncertainty in Kenya and the slowdown we’ve seen in private sector credit, in part due to the interest rate cap, it is perhaps not surprising that we have hit the biggest slowdown since 2015.”

Experts say the market can be expected to stabilize towards the end of 2018.