According to the Hassconsult Property Index, which was released on Thursday, at the current interest rates, half of all Kenyans living in urban areas could not afford the loan repayments for a house price at 700,000 Kenyan shillings.
“We found that the property prices this quarter actually bounced back with 1.9 per cent across all properties, most notably in the apartment segment, of 2.3 per cent,” Sakina Hassanali, head of research and marketing at HassConsult, told CNBC Africa.
“We found that rents are still rising, there’s still some inflationary pressure there, and we’ve found that the most notable of those increases is in the semi-detached segment, which grows by about 2.7 per cent, making it 18.1 per cent over the entire year.”
Hassanali added that none of the banks on their mortgage report had considerably reduced their rates, with the average lending rate still remaining at 17 per cent. This is roughly 8.5 percentage points above the central bank’s rate.
There is also a strong demand for housing in the lower end of the market than in the top end, which makes mortgage financing a significantly difficult task in Kenya.
“One of the biggest reasons is the mortgage bottleneck: a lot of people can’t afford to buy houses at the low end of the market on a cash basis, so they’re looking to mortgages. [With] the mortgages being unaffordable [and] inaccessible, it becomes very difficult for them to buy. They opt to rent property more, which is why we’re seeing these inflationary pressures in the rent section,” Hassanali explained.
In the higher end of the market, however, there are a lot more cash purchases, and the Index report found that in this end is not as burdened by heavy financing costs, which gives it more traction.
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Kenya’s deputy president Willam Ruto has called for a million mortgages to be added to the current pool of 20,000, but Hassanali explains that this take up will be unrealised without the rate cuts or government intervention.
“One of the biggest things is it’s not affordable. The interest rates are very high, the spreads that the banks have right now between eight and nine per cent is very high. For someone to move from rented accommodation to then buy the house that they were renting, their mortgage repayments would be about double or triple the amount,” said Hassanali.
“There’s also the issue of accessibility, where the larger percentage of Kenyans are in the informal market or not in formal employment, which makes them less eligible for a mortgage.”