The real estate sector grew at the slowest pace in six years in the three months to September last year, hurt by jitters over the prolonged electioneering period and a credit crunch.
Fresh data from the Kenya National Bureau of Statistics (KNBS) indicate that the construction sector, a major driver of economic growth in recent years, expanded by 4.9 per cent in July-September compared with 7.8 per cent a year earlier.
That was the slowest growth in the sector since 2011. The slowdown in the property sector is mirrored in other related industries like the cement, timber and metal markets.
Housing has been one of Kenya’s fastest growing sectors over the last decade, with returns from real estate outpacing equities and government securities.
“The slowed growth in the sector was partly attributed to the extended electioneering period that prompted investors to scale down construction activities,” KNBS said in the third quarter gross domestic product (GDP) report last Friday.
GDP growth fell to 4.4 per cent from 5.6 per cent in 2016. Credit growth has also slowed, partly because of a cap on commercial bank lending rates imposed in September 2016.
Financial and insurance activities recorded the largest deceleration from 7.1 per cent in the third quarter of 2016 to 2.4 per cent this year.
Flow of funds to the property sector grew by a measly 0.3 per cent compared to 6.2 per cent in the same period in 2016, the KNBS said.
As a result of the slowdown, which was evident from the beginning of 2017, cement consumption dropped by 13.09 per cent to 1,408,566 metric tonnes in the three months to September compared with the same period the year before.
The sluggish growth in construction activities also hit the importation of iron and steel products – key materials in the sector – whose volumes dipped by 66.1 and 37.9 per cent, respectively, KNBS said.
While land is seen holding its value for now, housing units that were previously snapped up even before the ground was broken are now struggling to find buyers. The impact was manifested in the poor performance of publicly traded cement firms.
Largest cement maker by market share, Bamburi, reported a 36.21 per cent dip in net profit for the six months through June to Sh1.85 billion, and has warned full-year profit for period ended December 2017 will fall by at least 25 per cent compared with Sh5.89 billion in 2016.
ARM Cement’s loss in six-month through June 2017 widened to Sh1.41 billion from Sh266.78 million in June 2016, while state-run East African Portland Cement slipped into a Sh1.5 billion loss for the year to June 2017.