Abstract: The aim of this study is to assess factors affecting the growth of real estate in Kenya. The objective of this study was to examine the effect of interest rate, inflation rate, and interest rate and GDP fluctuations on real estate growth. Higher market risk because of concentration in a specific industry, interest rate volatility and long term investment that can lead to decline in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property and default on loans. The study will be of great significance to the real estate firms and other researchers. The study adopted correlation research design. Secondary data was collected from central bank, Hass consultant quarterly property index. Time series analysis was applied; ADF revealed that real estate growth rate and exchange rate were stationary at the first difference while interest rate, inflation rate and GDP all were stationary at first difference. Johansen Cointergration was used to examine the long run relationship which revealed nonexistent of Cointergration among the study variables therefore it was not appropriate to fit error correction modeling to examine short run relationship. VAR was used to examine both impulse response and variance decomposition. An increase in exchange rate had a positive impact on real estate growth. Interest rate had a negative impact on real estate growth. This implies that the more the government borrows on short run locally it discourages real estate growth rate since there are increased borrowing charges thus the government should devise measures of borrowing externally as such to promote real estate growth. Thirdly, the results revealed that GDP had a positive influence on real estate growth rate. This implies that in order for the country to ensure that positive strides are made in relation to real estate then GDP acceleration strategies should be pursued which will ensure that the real estate grows at faster rates. Finally, inflation rate influence real estate growth rate positively. This implies that there an increase in inflation rate increases growth rate, there are various factors which influences an increase in inflation. An increased amount of money borrowed increases inflation though in most cases real estate is financed using debt financing. There is need to control inflation levels as such to eliminate the chances of increased cost as real estate grows.
Keywords: Growth, Real Estate, interest rate, inflation rate.
Title: Factors Affecting the Growth of Real Estate in Kenya
Author: NDUATI JOSEPH KIMANI, DR. FLORENCE MEMBA
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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