High Rates Drive Apartments Uptake
HIGH mortgage rates and soaring house prices have skewed Kenya’s housing demand towards apartments and smaller homes as the backlog rises to more than 1.85 million units, the Centre for Affordable Housing in Africa says.
Kenya needs to construct at least 132,000 new units
every year to meet demand for housing because of the fast-growing urban population, the South Africa-based CAHF says in its 2015 yearbook released recently.
Kenya’s real estate profile published in the CAHF yearbook indicates the rising demand for apartments and smaller units is because they are considered more affordable by middle and low income earners.
“The average loan size has risen from Sh6.9 million in 2013 to Sh7.5 million in 2014,” states the CAHF yearbook.
“Given an average loan size of Sh7.5 million, average mortgage interest rate of 15.8 per cent, 90 per cent loan-to-value and assuming a 25-year loan, repayment of such loan will be Sh100,740.4.”
This, CAHF adds, is unaffordable for the majority of Kenyans.
Despite this, the yearbook profile shows, there are major opportunities within the local housing sector that developers and financing institutions could explore to make home ownership affordable.
“Developers will be able to make a significant impact by constructing small units (studio, two-bedroomed and one-bedroomed houses), making joint purchase of land to reduce overall cost of completed units, sourcing concessionary loans at lower interest rates and by using alternative building materials,” says CAHF.
Source: the star