High construction costs continue to push up house prices

House prices are set to continue increasing with a new industry report saying the cost of building materials has become unreliable. 

While noting that there are signs of stability in the market, the new report by the Architectural Association of Kenya (AAK), however, noted uncertainty ahead.

The Status of the Built Environment 2022, which analyses the building and construction industry for the past year, cites the cost of fuel as one of the factors pushing up the cost of building materials. Taxes levied on some of the products has also been cited as contributing to the rising costs.

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The report describes the increase in fuel prices as astronomical to the industry, adding that they have a direct influence on construction. Compared to June 2021 when the price was Sh127 a litre, the price went up to Sh159 in June 2022 and closed the year 2022 at sh177.

“The transport industry directly influences construction material prices; as fuel prices go up so do material prices,” reads the report released this month.

AAK says the built and construction industry was hopeful for recovery after battling Covid-19. However, the Russia-Ukraine war emerged and severely affected the recovery process.

This is because some specific materials come from Ukraine and Russia, which affected the supply chain.“The prices and availability of essential construction materials such as steel, paint, aluminium, cement and PVC continue to remain unreliable in Kenya. The average price of a 50kg cement bag was Sh550 as of June 2021 compared to Sh650 in June 2022,” says AAK

The report says a kilo of steel locally rose from Sh100 to Sh180 in 2022. “The Russia-Ukraine war accounted for the majority increase in steel prices in Kenya and globally,” the AAK report reads. And the reporting by the New York Stock Exchange in January 2023 that the price of steel has increased by 29.5 per cent is pleasant news either to the industry.

“Additionally, there has been an increase in paint prices in Kenya, this is a result of paint manufacturers having to pay a 10 per cent excise tax on imported resin, in addition to 16 per cent value-added tax  (VAT) on their petroleum-based ingredients,” AAK says. The report also cited the 2022 polls as the other factor that slowed down the sector. The political jitters during the electioneering period made investors and key business people adopt a wait-and-see approach.

This led to delayed spending, and the key decisions to have the ball rolling were postponed and this subdued growth.