The year 2016 has started with the good news that the construction sector defied high interest rates in 2015 to post impressive growth in the last months of the year.
According to data released by the Kenya National Bureau of Statistics (KNBS) last week, the sector grew by 14.1 per cent in the third quarter of 2015 compared to 8.8 per cent over a similar period in 2015.
Construction loans to the sector grew by Sh22 billion (or 28 per cent) from Sh79 billion to Sh101 billion during the year. The KNBS says that the sector’s good performance was a major driver in the overall expansion of the economy in the third quarter, with the gross domestic product growing by 5.8 per cent compared to 5.5 per cent over the same period in 2014. This is a good reason for property investors to be optimistic in 2016.
But it should also be a good reason for policy-makers in the real estate sector to ensure that factors that hinder growth like high, unpredictable interest regime are dealt with decisively.
Already, some players are saying that the industry is likely to be hit again by the high cost of borrowing this year. High interest rates could see delay in projects completion or calling off of some planned projects, all together.
If that happens, the few developers who remain in the market could be forced to increase house prices and rents to recoup their investments as happened in 2011 and 2012, and last year.