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Effect of Government Expenditures, Mortgage Credit and Per Capita Income On Residential House Prices In Kenya

Show simple item record ANDELE, Steve 2021-06-25T09:36:30Z 2021-06-25T09:36:30Z 2020
dc.description.abstract Residential house prices in majority of global markets have been rising over the last decades in both nominal and real terms. Kenya’s housing prices have increased over a short period of time. The period 2004 to 2017 marked unprecedented rise in house prices in Kenya. Specifically, house prices surged to KES29.8 million (US$287,367) in September 2017, from just KES7.1 million (US$68,467) in December 2000 – equivalent to about 4.2 times increase. For that reason, this research was motivated by the fact that more than 70% of households in Kenya are unable to purchase a residential house. This increase in house price relative to households’ income has raised concerns about the causes of house price rise in Kenya. The extant researches on variables explaining the rise of house prices in Kenya have been descriptive in nature, with little inferential empirical evidence. Moreover, these researches have largely concentrated on macroeconomic variables such as National Income, input market variables such cost of construction and financial market variables such as inflation and interest rates. Little focus has been given to key housing sector players like the government, mortgage lenders and individual level incomes. The purpose of this study therefore was to examine the effect of government expenditure, mortgage credits and per capita income on house prices in Kenya. Specifically, the study sought to; determine the effect of government expenditure on residential house prices, examine the effect of mortgage credit on residential house prices, and analyse the effect of per capita income on residential house prices. The study was anchored on the inverse demand theory in a standard simultaneous equations model of demand and supply. Using correlational research design the study employed time series secondary data set for the period 2004 Q1 to 2017 Q4.Quarterlyhouse price data was collected from Hass Consult quarterly reports. Data on government expenditure and mortgage credits were collected from Central bank of Kenya quarterly reports and data on income was collected from Kenya National Bureau of Statistics quarterly reports. This study found out that in the long-run, government investment expenditure (ß1=0.23, p=0.0250), government recurrent expenditure (ß2=0.08, p=0.0146), mortgage loan (ß3 = 0.133144, p=0.0) have positive and significant effect on residential house prices in Kenya. While in the short run, government recurrent expenditure (α1=0.04, p=0.0114)and individual income(α2=1.14, p=0.0186) have positive and significant effect. Specifically, results of this study demonstrate that a 1% increase in government investment expenditure will cause a 0.23% increase in residential house prices; similarly a 1% increase in government recurrent expenditure will cause a 0.08% increase in of house prices in the long-run. In addition, in the long run, a 1% increase in mortgage credit will cause a 0.13% increase in residential house prices. This study further established that any deviation from the long run equilibrium is corrected at a speed of 40% in the next period. Government should focus on policies that increase house supply; while to investors, the speed of adjustment does not seem to encourage arbitrage profit. Finally, further studies are needed to better understand variation in prices for different kind of residential houses. en_US
dc.publisher Maseno University en_US
dc.title Effect of Government Expenditures, Mortgage Credit and Per Capita Income On Residential House Prices In Kenya en_US
dc.type Thesis en_US

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