Global Oil Price Drop Could Boost Kenya’s Real Estate Market
Leading property portal looks at the effect of fluctuating oil prices on the real estate sector
Fuel prices have been a hot-button issue influencing the socio-political engines stoking Kenya’s economic growth. The prices are dictated by a myriad of variables not limited to currency fluctuations, politics, fear and speculations over and above normalized principles of supply and demand.
The country recently experienced a fluctuation of energy prices due to the unstable global crude oil prices. As a net importer of crude oil, Kenya is set to benefit from the falling oil prices that will boost the country’s economy. The drop in oil prices which was the highest since the Energy Regulatory Commission came into office and resulted in a decrease in the cost of various commodities in the country. This resulted in a reduction of the inflation rate fueling consumer confidence. Notably, an increase in fuel prices would lead to a higher inflation rate which would reduce the disposable income per capita.
The real estate sector has experienced remarkable growth in recent years, largely due to the country’s stable economic environment. This has led to an increase in developments within both the residential and commercial property sectors. The two biggest subsectors that affect the real estate industry are industrial manufacturing and transportation. Construction machinery runs on fuel which means that when prices increase, the cost of construction increases. The price increase or decrease in fuel prices is directly proportional to the price increase or decrease in construction.
Lamudi Kenya Managing Director Dan Karua said: “A fall in the fuel prices leads to a reduction of prices in many things that work in tandem with the real estate sector, including transportation costs for materials as well as the production of those materials. A lower inflation rate leads to more consumer spending and therefore, one can easily access mortgage facilities and pay for goods and services.”
When people have more disposable income, they are likely to invest more. This can also lead to an increase in the amount of retail space as businesses will be flourishing due to the increase in consumption power. This is primarily because of the low cost of commodities resulting in a higher demand for goods.
“The fall in oil prices is highly beneficial to the consumer and developers as the cost of construction will be drastically reduced, affecting the price of developments in a three-tier reduction effect,” Mr. Karua added.
Launched in 2013, Lamudi is a global property portal focusing exclusively on emerging markets. The fast-growing platform is currently available in 32 countries in Asia, the Middle East, Africa and Latin America, with more than 900,000 real estate listings across its global network. The leading real estate marketplace offers sellers, buyers, landlords and renters a secure and easy-to-use platform to find or list properties online.