In sharp contrast to 2011, when Kenya’s house prices recorded double digit growth, prices in the second quarter of 2012 were almost flat.

In the same vein, rental prices increased as buyers who were affected by the current high interest rates opted to rent, this was disclosed by HassConsult, a real estate firm that publishes Kenya’s only regular property price index.

According to the firm, house prices could remain subdued until after the March 2012 general elections since real estate developers are putting off investments. In the second quarter of 2012, house prices edged up marginally by 0.9 percent against 15.7 percent in the same period last year. In addition, rental prices rose 7.7 percent compared with 6.8 percent in 2011.

“This surge in rental prices comes as landlords cover higher finance and other costs, policy makers also raised rates aggressively late last year to fight high inflation and to prop up the currency,” Farhana Hassanali, property development manager at HassConsult told Reuters.

These raised commercial interest rates to as high as 30 percent from a low of 14 percent, which had left developers and buyers struggling.

Kenya has a population of 40 million and records an annual massive housing deficit with annual demand at 250,000 units per year against a supply of 60,000 units, a World Bank study showed.

However, HassConsult expects prices should start rising if the elections go smoothly.

Kenya’s real estate market has witnessed significant growth outperforming other sectors like the capital markets and tourism in the midst of economic downturn and post poll violence.