Rising inflation, new housing levies and interest rates could slow growth of affordable houses

Mizizi Africa Homes has projected a likely slow down in the development of affordable houses in the country on the back of rising interest rates on loans, higher inflation and increasing cost of construction.

The developer sees these factors impacting everyone- developers, homeowners and government the low collection and a general slowdown in economic growth.

First-time homeowners will be the hardest hit by these rising costs.

“Every aspect of housing cost has gone up. Consumer purchasing power is low due to the high cost of living, taking a loan is much more expensive now, you require a lot more to start a construction project and there is also a new levy coming for those seeking to dispose of their properties,” said Mizizi Homes Africa Chief Executive Officer, George Mburu.

For the first time in seven years, the Central Bank of Kenya last month increased the base lending rate by 0.5 per cent, pushing the benchmark rate to 7.5 per cent and signalling higher borrowing costs.

A significant spike in cooking oil, and wheat flour prices among other commodities since the start of the year has also pushed up the country’s inflation rate over the ceiling of the central bank’s target range of 7.5 per cent for the first time since the country’s general elections. Kenya’s inflation rose to 7.9 per cent in June.

“This has significantly eroded consumer purchasing power as most people struggle to balance higher daily expenditures as some break into their savings and others delay settling mortgages as others miss home instalment payments,” said Mburu.

Similarly, the war in Ukraine has resulted in the rising cost of building materials due to disruption in global supply chains and forex exchange volatility that will directly impact the cost of affordable houses.

“Already the cost of acquiring land is very high in Kenya, taking up to more than 50 per cent. Coupled with these new costs of materials and loans, will potentially impact the speed of developing affordable units,” Mburu explained.

Again, “Capital Gains Tax has been reviewed up from 5 per cent to 15 per cent. This will eat into profits of those seeking to resell their properties once it comes into effect early 2023,” he added.

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