The Determinants of House Prices by National Housing Corporation in Kenya

Abstract

This paper studies the determinants of house prices by National Housing Corporation (NHC) in Kenya. The main question addressed is whether the conventional fundamental determinants of house prices, such as GDP per capita, real interest rates, and construction costs, have driven observed house prices in Kenya. This study relied on secondary data. The research adopted a case study of National Housing Corporation. Regression analysis was used to analyze the data and find out whether GDP per capita, real interest rates and construction costs determined house prices by NHC The study shows that house prices in Kenya are determined to a large extent by the underlying conventional fundamentals and some transition-specific factors, in particular institutional development of housing markets and housing finance and quality effects. There appears to be a strong correlation between the house prices and conventional determinants (GDP per capita, real interest rates, and construction costs). A summary regression showed that the variables considered could explain that house prices were really determined by these variables.