The Effect of Macro-economic Variables on Real Estate Development in Kenya

Evelyne C Bor, Duncan E Ochieng


Purpose – The development of real estate sector in any context is highly affected by several economic factors. This study sought to establish the effects of macroeconomic factors on real estate sector development in Kenya. Independent variables studied are balance of payment, government expenditure, external government debt, foreign direct investments, taxation, interest rate, inflation rates, unemployment, capital market development and exchange rates.


Methodology – Development of the real estate sector was measured by quarterly Hass Consult Property index. Secondary data was collected for a period of 10 years (January 2008 to December 2017) on a quarterly basis. The study employed a descriptive cross-sectional research design and a multiple linear regression model was used to analyze the relationship between the variables.


Findings - The results of the study produced R-square value of 0.840 which means that about 84 percent of the changes in growth of the real estate sector in Kenya can be explained by the ten selected independent variables while 16 percent in the variation was associated with other factors not covered in this research. The study also found that the independent variables had a strong correlation with growth of the real estate sector. The results further revealed that individually only balance of payment and unemployment rate are statistically significant determinants of real estate development in Kenya.


Implications - Adequate measures should be put into place to improve and develop the real estate sector in Kenya by reducing both the prevailing unemployment rate levels and current account deficit.


Value – The study will be used as a guide in formulating policies by the government and any other institution involved in policy formulation for the real estate sector.


Key Words: macro-economic variables, Real Estate Development in Kenya

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