Macroeconomic determinants of supply of houses in real estate industry in Kenya

Abstract

The purpose of the study was to investigate the determinants of supply of houses in real estate sector. Specifically, the study sought to establish whether inflation (price level changes), growth rate in Gross Domestic Product (GDP) and interest rate offered by financiers affect the supply of real estate in the market. The study adopted descriptive correlational research design. The target population consisted of all the new houses constructed in Kenya annually. Secondary data was used. The data collected included, data on new houses built annually and price levels of houses in Kenya was obtained from the real estate firms, data for interest rate was obtained from the Central Bank of Kenya (CBK) while data for growth of GDP was obtained from the yearly economic surveys and the statistical abstracts between from Kenya Bureau of statistics. The study adopted the regression model to analyze the data. The data was analyzed using statistical software specifically, SPSS version 18 and presented in form of tables and graphs. The study found a positive and significant relationship between supply of houses in real estate sector in Kenya and the price levels and growth in GDP. It was concluded that growth of GDP, price levels and interest levels have an influence on supply of houses. An increase in interest rates affects lending and thereby affecting the supply of the houses. The researcher recommends that the government should streamline the various real estate policies also establish a housing loan guarantee scheme run by existing government housing corporations to assess risks in some real estate development and also encourage financiers to lend more and at affordable interest rates.