Global Slowdown Infects Africa - Is Kenya's Housing Bubble About To Burst?

The global macro picture continues to look uncertain for 2019, with August 2018 likely the peak month for global growth, as synchronization has been all but lost.

There is evidence that real estate markets are stalling in Asia, Australia, Europe, and the US, with new evidence suggesting the slowdown has infected Africa.

The housing market in Kenya has been experiencing a year-long market topping process with a rise in non-performing loans (NPLs) and oversupply fears.

NPLs in the sector jumped by Sh6.1 billion ($59,406,251), or 15.8% in April-June to Sh44.4 billion ($428,502,229) compared to the previous quarter as real estate developers outpaced manufacturers (11.7%) and traders (7.3%) in the growth of default on loans, according to a new Central Bank of Kenya’s (CBK’s) quarterly report.

CBK’s report shows "11.3% of the Sh392.7 billion ($3,824,819,888) gross loans extended to investors in land and houses by commercial banks over the years were not being serviced as at the end of June," said Bussiness Daily Africa.

“The real estate sector registered the highest increase in NPLs by Sh6.1 billion ($59,406,251) due to slow uptake of housing units,” the CBK said in the report.

Real estate has been one of Kenya’s fastest growing sectors in the last decade, with returns outpacing the Nairobi Securities Exchange index and government bonds.

The Kenyan property market has, like other property markets around the world, suddenly hit a brick wall. The Kenya Bankers Association (KBA) notes in a separate report, growth returns for property developers nosedived in the last quarter of 2017 when housing prices declined by 4% compared to 10% in the same period for 2016 - due to soaring inventory.

“A combination falling growth rates in rental income and selling prices signals low demand for properties, perhaps explained by reduced purchasing power for properties,”according to a financial sector stability report published by the CBK early September.

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