High mortgages deter home ownership in Kenya

July 23, 2013
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Kenyans prefer to buy houses in cash to escape the burden of paying mortgages/FILE
Kenyans prefer to buy houses in cash to escape the burden of paying mortgages/FILE
NAIROBI, Kenya, July 23- High mortgage rates from the local banks stand as the biggest challenge for the growth of the real estate sector in the country, according to latest Hass Consult Index.

The 2013 quarter two Index showed a growing trend of most Kenyans preferring to buy houses cash and escape the burden of paying mortgages.

The real estate firm’s Head of Marketing Sakina Hassanali said on the other hand home buyers who found house prices beyond their reach moved to renting houses instead, a move that led to rental prices going up by 5.1 percent in the last three months.

“For cash buyers, the sector remained the country’s strongest asset class,” Hassanali noted, “those who have been buying houses at this stage are finding the current high levels of mortgage repayments too costly and opting to continue paying rent. But landlords, looking at buying houses through mortgage as a buy-for-rent, are also facing a similar equation of returns that are not currently covering the cost of finance,” she said.

Stand alone houses saw strongest gains, up 3 percent, driven by sharp rises for particular properties chased by multiple buyers.

Despite claims that rates were being held high on uncertainty surrounding the elections, half of the banks assessed did not cut rates in second quarter at all.

“The high cost of finance continues to be the dead hand on the sector with the actual profiteering concentrated among Kenyan banks. For these banks the spreads between their own mortgage rates and the Central Bank of Kenya rate remained at or above 10 percent,” Hassanali pointed out.

Foreign banks in the country however have however led the way in further cuts including CFC Stanbic bank and Standard Chartered.

Standard Chartered is the lowest lender at the moment at 12.9 percent and CFC at 13.5 percent. The cuts from the foreign banks did, however, bring the average rate down, from 17.7 percent to 16.5 percent.

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