The Effect of Macroeconomic Variables on the Value of Real Estates Supplied in Kenya

Abstract

The real estate market plays a very important role in any economy. It is known to have a dramatic multiplier effect and is a key economic indicator. The real estate market has experienced significant growth in the last decade with many countries experiencing house price fluctuations. The Kenyan real estate market has been experiencing a boom in the past ten years and the latest findings have shown that the trend will continue into the foreseeable future. To ensure the economy is proper positioned a study into the forces that contribute to value of real estate supplied is paramount. This study investigates the effects on macroeconomic variables on effect value of real estate supply in Kenya. Monthly secondary data for a period of five years spanning from 2009 to 2013 was collected from publications in government and real estate industry. Descriptive as well as multiple regressions were run using SPSS version 21.0. A multivariate regression model showing the relationship between residential real estate prices and various variables was tested. The variables are Inflation rate, GDP rate, Employment growth rate, Population Growth rate, Cost of Construction and Percentage of debt financing. The results show that there were positive relationships with GDP and value of real estates supplied, being the most significant, followed by Inflation, Cost of construction and Percentage of debt financing. Data on Population growth rate and Employment rates were constant and their relationship could therefore not be established. Value of real estate supply has shown an upward trend with time hence the real estate market in Kenya is expected to continue to grow. Even without significant changes in the variables, the effect of time is that value of real estate supply continued to grow. This also indicates that the real estate market is significantly stable and will continue to impact greatly of the economic growth of the country