Open Access Open Access  Restricted Access Subscription or Fee Access

EFFECTS OF INTEREST RATES ON THE PERFORMANCE OF REAL ESTATE INDUSTRY IN KENYA: A CASE OF NAIROBI COUNTY

Edwin Kamweru, Mr. Ngui Mr. Ngui

Abstract


Purpose: The study sought to determine the effects of interest rates on the performance of real estate industry in Kenya: A case of Nairobi county.

Methodology: The study adopted a descriptive survey research design.

Results: The study findings revealed that lending interest rates had a negative and significant relationship with real estate growth in Nairobi. The findings show that deposit interest rates were insignificantly related to growth of the real estate firm in Nairobi. The long run model findings also revealed that overdraft interest rates had a significant relationship with real estate growth in Nairobi. The findings revealed that inflation had a negative and significant relationship with performance of real estate firms in Nairobi. GDP growth was found to have a positive relationship with the performance of real estate firms though the relationship was insignificant.

Unique contribution to theory, practice and policy: The study findings revealed that lending interest rates have a negative and significant relationship with real estate growth in Nairobi. The study recommends that the CBK should implement monetary policies that aim to reduce the lending interest rates that financial institutions charge on lending so as to bring stability in the industries including real estate industry. The study recommends that the Central bank of Kenya as well as the Treasury should come up with monetary policies to regulate the rate of volatility in inflation rate in the long run since long term investors in real estate are likely to suffer loses if the economy is characterized by unstable rates of inflation. The study findings also indicated that GDP growth has a positive relationship with the performance of real estate firms in the long run. The study recommends that the government should reexamine the strategies and policies that aim to spur GDP growth.



This Abstract was viewed 641 times | PDF Article downloaded 467 times

Keywords


: lending, interests rates, performance, real estate industry, deposit, overdraft, GDP growth, inflation rates

Full Text:

PDF

References


Ali, A., & Daly, K. (2010). Macroeconomic determinants of credit risk: Recent evidence from a cross country study. International Review of Financial Analysis, 19(3), 165-171.

Boehm, T. P., and Schlottmann, A., (2007), “Mortgage pricing differentials across Hispanic, African-American, and White households: Evidence from the American Housing Survey”, Cityscape, 93-136.

Bredin, D., O’Reilly, G., and Stevenson, S. (2007), “Monetary Shocks and REIT Returns”, The Journal of Real Estate Finance and Economics, 35(3), 315-331.

Bulloch, B., & Sullivan, J. (2010) Information - The key to the real estate development process. Cornell Real Estate Review, 8: 78-87.

Cheng, P., Lin, Z., and Liu, Y. (2010), “Ping Chen, Zhenguo Lin, and Yingchun Liu, “Illiquidity and Portfolio Risk of Thinly Traded Assets,” Journal of Portfolio Management 36(2):126-138 (Winter 2010).

Crowley, A. (2000), “Taming the Ferocious Outsourcing Beast”, PC Week: 85.

Crowley, A. (2004), “Taming the Ferocious Outsourcing Beast”, PC Week, (Feb.):85.

Crowley, J., (2007), “Interest Rate Spreads in English-Speaking Africa”, IMF Working Paper: 123-45.

Geltner, M. D., Miller, G. N., Clayton, J., and Eichholtz, P., (2007), “Commercial Real Estate: Analysis & Investments (2nd Edition, Thomson South-Western.

Glaeser, E., Gottlieb, J., Gyourko, J., (2010).Can interest rates explain the US housing boom and bust? Research-based policy analysis and commentary from leading economists.

Hall, R., and Taylor, J. B., (2009), “Macroeconomics”, New York: W.W. Norton.

He, L. T., Webb, J. R., and Myer, F. C. N. (2003), “Interest Rate Sensitivities of REIT Returns”, International Real Estate Review, 6(1), 1-21.

Hiang, L. K., & Webb, J. R. (2007).Are international real estate markets integrated: evidence from chaotic dynamics. Technical Report, October 2007. Hartford: Real Estate Research Institute.

Kamau, L. W. (2011), “Factors Influencing Investment in the Real Estate Industry in Nairobi County, Kenya”, Unpublished Thesis Moi University.

Keynes, J. M. (2008), “The General Theory of Employment, Interest and Money”,Chapter 19: BN Publishing.

Keynes, J. M., (1936), “The General Theory of Employment, Interest and Money”, Basingstoke, Hampshire: Palgrave Macmillan.

Khawaja , I., and Musleh, D., (2007), “Determinants of Interest in Pakistan”, Working Papers 2007:22) The Pakistan Development Review, Pakistan. Islamaba.

Kimmons, J. (2010), “The Sales Comparison Method of Real Estate Appraisal and Valuation”, Oxford Review of Economic Policy, 24: 180-205.

Kohnstamm, W. C. (1995), “Real Estate "Cycles": Some Fundamentals”, Real Estate Economics, 27(2), 209–230.

Krainer, J. (2009). Recent developments in mortgage finance. FRBSF Economic Letter, 33.

Lin, Z., and Vandell, K., (2007), “Illiquidity and Pricing Biases in the Real Estate Market,” Real Estate Economics 35(3):291-330.

Loyford, M. M. and Moronge, M. (2014), “Effects of Economic Factors on Performance of Real Estate in Kenya”, European Journal of Business Management, 1 (11), 181-200.

Mbugua, A., (2004). “A Primer on Securitization”, Journal of Real Estate Literature, 13, 141 - 164.

McKinnon, R. (1973), “Money and Capital in Economic Development”, Washington, D.C.: Brookings

Muriuki, N. M. (2013), “The Effect Of Interest Rates Volatility On The Growth Of Real Estate Market In Kenya”, Unpublished MBA Thesis, University of Nairobi.

Muthaura, A., (2012), “The Relationship between Interest Rates and Real Estate Investment in Kenya”, Unpublished MBA Thesis, University of Nairobi.

Mwathi, J. K., (2013), “The Effect of Financing Sources on Real Estate Development in Kenya” Unpublished MBA Thesis, University of Nairobi.

Ngugi, R. (2007), An Empirical Analysis of Interest Rate Spread in Kenya. African Economic Research ConsortiumResearch Paper 106, Nairobi, AERC.

Ngugi, R., (1999), “An Empirical Analysis of Interest Rate Spread in Kenya.” AERC Research Paper. Nairobi, AERC.

Ngugi, R.W., (2001), “An Empirical Analysis of Interest Rate Spread in Kenya”, African Economic Research Consortium, Research Paper 106.

Njiru, M. M and Moronge, M. (2013), “Factors Affecting Growth Of Mortgage Industries in Kenya: A Case Study of National Housing Corporation”, International Journal of Social Sciences and Entrepreneurship, 1 (7), 26-35.

Omboi, B. M., and Kigige A. M., (2011), “Factors Influencing Real Estate Property Prices: A Survey of Real Estates in Meru Municipality, Kenya”, Published research paper Kenya Methodist University.

Omengo, S. (2012), “High Interest Rates Hurt Real Estate Investment”, Kenya: Realtor.

Ramchander, S., Simpson, M., and Webb, J., (2003), “Macroeconomic News and Mortgage Rates”, Journal of Real Estate Finance and Economics, 27:3, 355-377

Sanders, A. B., (1997), “The Historical Behavior of REIT Returns. Real Estate Investment Trusts: Structure, Analysis, and Strategy, International Real Estate Review, 2(3), 59-77.


Refbacks



Paper submission email: info@carijournals.org

This journal follows ISO 9001 management standard and licensed under a Creative Commons Attribution 3.0 License.

Copyright © www.carijournals.org