In 2016, amid a rapid increase in demand for housing against short supply, which led to a sharp increase in prices, players in the real estate sector frantically battled to allay fears of an imminent bubble and a subsequent burst.
Potential buyers were hoping for the bubble to burst, a phenomenon in which demand would decrease with an increase in supply, leading to a sharp drop in property prices.
The widely speculated bubble “is a rise in housing costs that is driven by demand, speculation, and reckless spending until it bursts”, says Clive Ndege, head of sales at Superior Homes Kenya.
“(Housing bubbles typically begin) due to a restricted supply that takes a long time to replenish and increase. Market speculation raises demand by injecting additional capital into the market. At some point, demand declines or stagnates as supply rises, which causes prices to drop dramatically and the bubble to burst,” he says.
So in 2016 and 2017, industry leaders came out to forcefully deny any chances of a real estate bubble. A bubble burst in the US a decade before had left markets sensitive to the slightest signs of an impending bubble.
Knight Frank Kenya then said that a real estate bubble could only occur in well-established real estate markets.
“The Kenyan market is not experiencing a bubble but the normal real estate cycles of rising demand, peaking market, falling market then bottoming out and the rapid price increments witnessed are because the Kenyan real estate market is in the rising phase that is characterised by low supply, high demand leading to increased prices,” it said in a report.
“(Housing bubbles typically begin) due to a restricted supply that takes a long time to replenish and increase. Market speculation raises demand by injecting additional capital into the market. At some point, demand declines or stagnates as supply rises, which causes prices to drop dramatically and the bubble to burst,” he says.
So in 2016 and 2017, industry leaders came out to forcefully deny any chances of a real estate bubble. A bubble burst in the US a decade before had left markets sensitive to the slightest signs of an impending bubble.
Knight Frank Kenya then said that a real estate bubble could only occur in well-established real estate markets.
“The Kenyan market is not experiencing a bubble but the normal real estate cycles of rising demand, peaking market, falling market then bottoming out and the rapid price increments witnessed are because the Kenyan real estate market is in the rising phase that is characterised by low supply, high demand leading to increased prices,” it said in a report.
