NAIROBI, Kenya, Jun 30 – The cost of housing in Kenya is unlikely to be affected by the bubble burst in the construction sector, a government official has said.
Housing Permanent Secretary Tirop Kosgey told Capital Business that although there’s a possibility that the construction boom might slow down, property prices would most likely remain high to match the demand for housing.
“The demand-driven prices are much higher than what we would normally expect. So the prices would not be any higher than what they are,” he explained.
However Mr Kosgey said that should the demand for land fall, then house buyers might get a reprieve as it would translate in a drop in housing prices.
“When the demand for land as driven by the current big inflow of resources into the sector goes down, the prices of land will go down so that will mitigate on the price of housing and might bring the cost of housing a bit lower,” he added.
Although experts in the industry have differed on when the construction bubble will burst many agree that it will happen in the near future.
Mr Kosgey disclosed that the government was undertaking a study to determine the source of the increased resources into the real estate sector in order to predict the future of the housing sector.
Housing prices and rent charges have skyrocketed in the last five years but a burst would lead to a market correction where the true value of the properties would be reflected.
There has been speculation that the capital invested into the housing industry could be from foreign sources such as remittances and proceeds from piracy and not the incentives and policies that are being implemented by the government.
“Believing that the resources are basically due to the facilitation by the government and the improved economic status of Kenyans then we do not think this would come down in the short term,” he said of the boom.
Kenya currently has a shortfall of about 150,000 units per year and a burst would only exacerbate this problem.
“A boom normally relies on how much resources are put into a sector but it (burst) would only mean that we will be having less houses being constructed in a year. So the problem of backlog would continue,” he said.
He further stated that the Ministry was undertaking various measures such as giving incentives to the process of development of housing and mortgage uptake to help the market correction ‘come sooner than later’
“We are also trying to change people’s mindset so that they go for owner occupied housing instead of relying on the tenancies once the market can provide products that Kenyans can afford,” the PS added.