Kenya's Housing Market: A Win for Homebuyers, A Challenge for Developers

Nairobi, Kenya – The dream of homeownership in Kenya might be getting a little closer for many, as house prices continue their downward trend. However, this positive shift for prospective buyers is simultaneously creating significant headwinds for the country's real estate developers. According to the latest Kenya Bankers Association Housing Price Index (KBA-HPI) released on February 14, 2025, the market is undergoing a notable correction. ### A Buyer's Market Emerges For those aspiring to own a home, the news is largely encouraging. House prices in Kenya dropped by 1.1% in the third quarter of 2024 compared to the previous quarter, and a more substantial 14.28% year-on-year. Dr. Samuel Tiriongo, KBA Director of Research, attributes this slowdown to 'a correction in prices due to reduced speculative buying and changing financing conditions.' Banks are reportedly adjusting their lending policies to better support homebuyers, a move that could further stimulate demand in the coming months. This trend, coupled with Kenya's robust economic growth of 5.3% in 2024 and moderate inflation at 6.7%, creates a relatively stable environment for investment. Furthermore, with formal financial inclusion standing at an impressive 84%, more Kenyans have access to banking services, though the actual penetration of mortgages remains low at 3.6% – indicating significant room for growth in housing finance. Townhouses remained the priciest option, averaging KES 38.63 million (with high-end units reaching KES 59 million), followed by Maisonettes at KES 26.08 million. Apartments, while still dominating transactions, saw a slight decline in market share as buyers explore other housing types. ### The Developer's Dilemma While buyers find opportunities, the landscape for real estate developers is proving more challenging. The KBA-HPI highlights that while credit to the broader real estate sector saw a slight increase of 2.36%, lending to the construction sector specifically plummeted by 13.47%. This reflects a cautious approach from banks, leaving some developers struggling to secure financing for new projects. Adding to their woes, building costs have reportedly risen by 9.1% (as per the report's headlines), creating a squeeze where input costs are increasing while property prices are falling. This pressure is evident in the contraction of the construction sector by 2.0% in the third quarter of 2024. Curiously, cement consumption did increase, suggesting that ongoing construction activity might be largely driven by government-backed housing and infrastructure projects rather than private sector development. ### Bridging the Housing Gap Looking ahead, the focus is shifting towards ensuring sustainable growth in the housing market. Policymakers are expected to prioritize making financing readily available, particularly for low-income earners who have historically found mortgage access challenging. The current environment, with falling house prices and evolving financing conditions, presents a unique opportunity to address Kenya's significant housing deficit. Dr. Tiriongo emphasizes the importance of a 'well-functioning housing market' for economic stability. He urges continued efforts to 'ensure that financing options remain open and that affordable housing projects are completed on time.' The convergence of these factors – increased affordability for buyers and strategic support for developers – will be crucial in shaping Kenya's housing future.