The Kenyan property market has survived the recent downturn reasonably well with prices still rising albeit more slowly than during the property boom of the last decade. It is now lower-cost housing that is proving most popular, and there is also a change in the way property purchases are being funded. As the economic recovery has taken place there has been an increase in the number of mortgages being taken out whereas properties used to be bought for cash.
This increase is due to a policy implemented by the Central Bank of Kenya which reduced interest rates and in turn triggered a large decline on returns on government bonds. This forced financial markets to look for some other form of income which led to them to begin promoting mortgages especially to middle income professionals. There is no doubt that the mortgage market has huge potential in a country where just 16% of the population own their own homes, but the increase in mortgages has also amplified the shortage of housing especially for those on lower incomes.
This shortage is attracting investment in several forms as there has been an increase in direct foreign investment in property projects, as well as interest from foreign private equity firms and pension funds. This increase looks likely to spark further building projects to increase the housing stock in an attempt to meet growing demand as more and more Kenyans want to get onto the property ladder. It's highly likely that in the short to mid-term the demand for housing will continue to outstrip supply as the economy continues to improve and the availability of mortgages gets better.
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