The housing sector is very much associated with the economic health and wealth of a nation. When the demand for housing is high other sectors of the economy will be able to realize tremendous growth. Thus, research into certain variables that contribute to property prices is essential because the purchase of a residential property is both an investment decision as well as consumption. Real estate is affected by both micro and macro variables. On the macro level it’s connected with the financial sector and on the micro the behavior of the consumers. The development of real estate industry is important for the overall development of a country. It contributes to employment, development of commercial banking, and ultimately development of capital markets and also increases the well being of household by putting shelters above their heads and giving them a chance to own a home (Taylor 2004)
In order for the real estate industry to thrive there needs to be a stable macroeconomic environment that is favorable to long term real estate and mortgage development (Liose Wambui Kamau 2011) The real estate was identified as the hedge against inflation but in 2011 Kenya has been affected by inflation and more so the increase in interest rates .This has affected the industry negatively since there has been a decrease in the number of players joining the real estate market.
Inflation is an evil that haunts a country some the causes of inflation are 1) demand pull inflation;…