Study of the macroeconomic determinants of the prices of residential real estate in Kenya

Abstract

According to Brueggeman and Fisher (2005) and Pagourtzi, Assimakopoulous, Hatzichristos and French (2003) real estate refers to land and anything fixed , immovable or permanently attached to it such as buildings and fences. Real estate markets are mainly characterized by the fact that they are heterogenous. There are no purchases in this market that are similar; every purchase, be it aparcel of land or developed property is unique and often, information on these transactions is not easily accessible or available to the public. The market is also characterized by large transaction costs and amounts in general. (Ridker, & Henning. 1969.) The buying process is not standardized because the pricing process is heavily based on negotiation. Housing has a significant role in sustaining economy growth in a country. The level of housing provision is one of the key performance indicators (KPis) of development (Ireri, 2010). ln . Kenya, specifically in major urban centres like Nairobi, supply of housing does not meet the . increasing demand, as a result of poor planning among other factors (UN- HABITAT, 2008)~ .· The Ministry of Land, Housing and Urban Development in 2013 estimated the annual demand for housing in Nairobi County at over 250,000 units yet the annual supply was a mere 30,000 . units niostly contributed by the private sector and not the government (Hassanali, 2012).