Influence of Transaction Costs on Unsold New Houses Held by Members of Kenya Property Developers Association in Nairobi County

Abstract

Despite the housing shortage in Kenya, property developers continue to record high numbers of unsold new houses thus tying up funds which jeopardizes the capacity of property developers to engage in constructing more new houses to meet the ever-increasing demand. The purpose of this study was to determine the influence of transaction costs on unsold new houses held by members of the Kenya Property Developers Association (KPDA). The study adopted a positivist philosophy and descriptive correlational research design. The study population consisted of 4,085 unsold new houses. A sample size of 364 units was drawn using a multistage random sampling technique. Property managers of the members of KPDA were the unit of observation and data was collected through a self-administered questionnaire. Data analysis was done through descriptive statistics which comprised of relative frequency distributions, means, and standard deviation. Inferential statistics used included ordinal logistic regression and one-way analysis of variance. The study findings from the generalized ordinal logistic regression revealed that transaction costs of the unsold new houses explained 18.7% of the duration they remained unsold (r 2 = 0.187. Moreover, the results indicated that registration fees (β = 0.398, p < 0.05), real estate agent commissions (β = 0.568, p < 0.05), and legal fees (β = 0.306, p < 0.05) had a significant influence on the duration that new houses remained unsold. The study concluded that transaction costs of the unsold new houses impact the duration the houses remained unsold. The study recommends that residential property developers should consider reducing the transaction costs of the unsold house to below 5% of the quoted price.