The effect of mortgage financing on perfomance of real estate market in Kenya

Abstract

Real estate market has been used as a vehicle towards economic development. Performance of real estate is triggered by growth in population as there is adequate demand thus real estate participants provide housing units through mortgage financing. The housing sector require mortgage financing which entails monthly repayment, initial payment, long maturity and constant increase in prices of properties. The objective of the study was to establish the effect of mortgage financing on performance of real estate market in Kenya. The study considered a population of 19,177 outstanding mortgage loans drawn from 35 mortgage and financial institutions. The study employed stratified sampling techniques to draw a sample size of 392 respondents. Structured questionnaires and interviews were used as instruments of data collection to gather primary data from the respondents. Analyzed data was presented inform of tables, pie charts, percentages and bar graphs. SPSS Version 17.0 and advanced MS Excel were used to analyze quantitative data. Multiple regression analysis model was used to establish the effect of mortgage financing on performance of real estate market in Kenya. The study revealed that positive relationship exists between mortgage financing and performance of real estate market in Kenya. Homeowners invest in real estate property in anticipation of future increase in prices and rental income. Financial institutions provide adequate information to potential homeowners thus there is flow of information hence reduction in cases of moral hazards and adverse selection. To boost performance of real estate market in Kenya, the government has introduced RIETs, private public partnership, introduction of pension funds to be used as security to access the mortgage market.