Analysis of the impact of mortgage financing on the affordability of housing in Kampala

Abstract

The study analyzed the impact of mortgage financing on the affordability of housing in Kampala. The objectives of this study were to examine the extent to which the mortgage finance market affects housing affordability in Kampala; to analyze the underlying factors leading to high interest on mortgage finance; to assess the strategies the government has put forward to address the issue of mortgage finance and housing affordability. The study adopted both quantitative and qualitative approach, data was collected through questionnaire survey from occupants of randomly selected estates within as well as interviews with some financial institutions. A total of 120 close-ended questionnaires were distributed to the occupants but only 101 were completely answered. The results show that 63.4% of the occupants aged between 18-30 years are nowadays much involved in mortgage finances followed by those aged between 31-50 years at 29.7% and 6.9% were above 50 years. Education level was generally disagreed by both male and female occupants at 60.0% and 72.22% respectively as a determinant of housing affordability, household income as a determinant was also disagreed as a determinant, employment status was agreed by males as a determinant and disagreed in general by females. Land cost as a determinant of housing affordability was agreed on by 61.9% and 63.64% of females disagreed. Demand and supply as a determinant of housing affordability was agreed on by majority of females at 56% and disagreed on by males at 100%. Dependents’ quantity was disagreed on by females as a determinant at 60% and agreed on by majority of males at 59.36%. Inflation and exchange rate instability, Government policy, debt to income ratio and loan to value ratio were identified by the respondents from financial institutions as the factors influencing the price of mortgage. Fore closure risk was pointed out as the major problem involved in mortgage finance. The chi-square test revealed that most of the factors of mortgage price and housing affordability were given by both males and females independent of gender. This implies that the responses provided did not depend on gender at all. The study recommended that the government should come create enabling environment for public-private partnership promoters to provide affordable housing units to the populace which will justify affordable housing as a veritable public housing scheme and help reduce the massive housing deficit being experienced in the country.