Assessment of factors affecting residential real estate prices in Nairobi County
Ungayi, Hellen Musumba
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The study analyzes the effect of selected economic factors on real estate market in Kenya. House prices in Kenya have continued to rise over the past years. The study employed both cross sectional and time series data analysis to establish the relationship between growth in house prices in real estate and selected economic variables. Physical attributes of the property, locational factors and proximity to social amenities are fundamental in the determination of house prices. A factor analysis on cross sectional data showed that number of rooms, number of bathrooms, backup generator, swimming pool, balcony, parking garage and lift (micro variables) had significant effect on house prices at 5% level of significance. This is important for real estate developers when designing and building houses to capture home owners’ preferences that can add value and catalyze the residential real estate sector. Macro analysis of time series data using Vector Error Correction Model (VECM) revealed that on one hand inflation rate, Hass price index, investments in real estate and GDP while forex and diaspora remittances on the hand have asymmetric long run effects on growth in house prices on average, ceteris paribus. This implies that economic growth and conducive investment environment in the country stimulates developments in real estate which in turns leads to a steady supply of housing units at affordable prices for potential home owners. Lack of centralized housing data posed a challenge in collecting and collating time series data was one of the limitations faced by the researcher where it necessitated the researchers own calculation. This research will be of value as it gives insights on what matters most to different income groups as opposed to generalized findings.