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Expensive mortgages keep many from owning houses

Half of all urban residents cannot afford a mortgage to buy a house valued at Sh700,000, a new report has revealed.

Only one per cent can afford a mortgage for a house priced at Sh5.7 million, and a further four per cent for a Sh 3.9 million house.

Banks have maintained high borrowing rates in spite of their impact on the housing market.

Interest rate

Earlier this year, Deputy President William Ruto called for an enabling environment to allow Kenya to achieve one million mortgages, up from the current 20,000 and for a single digit interest rate but this has remained unheeded with most interest rates remaining unchanged, according to The Mortgage Report released in conjunction with HassConsult for the first quarter of 2014.

Mortgage company managing director Carole Kariuki, said in spite of minor adjustments and short-term interest rate discounts, Standard Chartered Bank remained the lowest lender at an unchanged rate of 13.9 per cent. 

“The most expensive mortgages are offered by Consolidated Bank at 19 per cent, while Chase Bank is the only bank that negotiates counter rates with individual clients at the rate of between 16.5 per cent and 19 per cent,” Ms Kariuki said.

“With the mainstream lenders hanging on to such high margins on their lending, the delayed take-off in Kenya’s mortgage market is discouraging private developers, and locking out most Kenyans from home ownership,” said Ms Kariuki.

“In the absence of a more constructive approach from banks, mortgage take-up now depends on government intervention, either through supporting mortgage backed securities to stimulate the secondary mortgage market, or through the creation of housing funds and even mortgage subsidies,” she said. 

The report also showed an increase in house and apartment sale prices, and also a continuing rent rises as property sales picked up from January and February, and were markedly strong in March. 

HassConsult head of marketing Sakina Hassanali said the market continued to be handicapped by the lack of access to mortgages for mid-level and lower level buyers. 

“We are seeing the demand for housing strongest at the lowest end of the market, but the financing options are almost non-existent, rendering the private sector property markets a high-end affair for so long as property remains a cash purchase only,” she said.

The bottleneck in housing finance also continued to push rents up, as professional Kenyans stayed in rented houses, with the rental of choice being semi-detached town houses. 

High prices

Asking rents for semi-detached houses rose by 2.3 per cent in the first quarter of 2014 compared with prices from October to December 2013, and were 18.1 per cent higher as compared to same time last year.

Rent rises for detached houses were much more subdued, at 8.7 per cent in March 2013, while apartment rents rose by 4.4 per cent.