Kenya’s mortgage market size is lagging behind its peers in sub-Saharan Africa, with a percentage to GDP of 1.88 in 2012, weighed down by high interest rates and property prices.

Data compiled by South Africa-based Centre for Affordable Housing Finance in its fourth edition of the Housing Finance in Africa Yearbook 2013 shows Kenya’s is ninth largest mortgage market in the region.

It trails Rwanda’s (2.3 per cent to GDP as of 2010), which is seventh in sub-Saharan Africa. South Africa tops the chart with 33.9 per cent in 2012, followed by Namibia at 18.21 per cent as of 2011. Morocco in North Africa has the third largest mortgage market in the continent at 13.85 per cent.

Mauritius (12.99 per cent in 2011), Tunisia (9.25 per cent), Seychelles (2.9 per cent) and Botswana (2.29 per cent) are fourth, fifth, sixth and eighth respectively.

Uganda’s mortgage market has also been growing, the yearbook notes, with the total residential mortgage portfolio estimated at about 0.98 per cent of its 2012 GDP.

“South Africa and Namibia remain the market leaders for Sub-Saharan Africa, challenged only by the performance of some economies in North Africa,” CAHF says in an analysis on the continent’s mortgage markets.

Zambia closes the top 10 biggest mortgage markets in the continent with 1.53 per cent as of last year.

Though Kenya has a dynamic mortgage industry that is growing rapidly and becoming increasingly competitive, the yearbook notes, “high interest rates undermine affordability even for modestly priced housing”.

A $13,000 (Sh1.13 million) house, for instance, would still require a monthly income of $677 (Sh57,830), with a 10 per cent deposit on a 20-year mortgage at an interest rate of 19 per cent.

According to the Central Bank, the predominance of variable interest rates lending is constraining growth of the country’s mortgage market. Kenya’s mortgage market is dominated by five lenders which control 71 per cent of the mortgage lending. These are KCB’s mortgage division S&L, Housing Finance, StanChart, CFC Stanbic and Co-operative Bank. KCB had a market share of 30 per cent in 2012, followed by HF with 19 per cent. The latter issued 5,235 mortgages in the year.

The country’s mortgage book amounted to Sh122.2 billion, a 35.2 per cent growth over the previous year. Outstanding mortgage accounts rose to 19,177 from 16,029 in 2011, according to the Central Bank.

In its bank supervision report, the CBK noted that the average mortgage loan size had jumped to Sh6.4 million in 2012 from Sh5.6 million a year before, attributing the change to hikes in property prices.

The largest segment of Kenyan households is locked out of homeownership by the high property prices. A World Bank survey in 2011 estimated that only about 11 per cent of the Kenyan population earns enough to support a mortgage.

“This means that most middle income earners cannot afford an average mortgage necessary to buy an entry level house,” the yearbook notes.

Bullish house pricing has been fuelled by a highly speculative property market and a huge deficit in housing supply amid high demand.

Source: The Star

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