We have three indices that we now publish every quarter, in what is the first information each quarter to offer insight into the way the economy is currently performing.

The information today relates to the period from April 1^st to June 30^th, that is, last Wednesday.

Two of the indices we issue are about house prices. These prices are of residential properties in Nairobi.

We issue two indices, because together they tell us more about what is happening, and what is likely to happen in the future.

The composite index, drawn from almost every agency in the city, is an index of the asking prices for residential properties in Nairobi. To compile this index, our researchers input the asking price of every available property offered for sale.

However, property prices are the subject of negotiation. If I ‘ASK’ for Sh12million for a house, you may only offer me Sh11million.

There is a difference between what is asked, and what is finally agreed.

And the relationship between the asking price and the selling price tells us a lot about what is happening in the market.

When selling prices rise, we know that people are having to pay more to get the houses they want. There is more interest, more buyers. In those circumstances, asking prices will rise too.

So, when demand is hotting up, both asking and selling prices move up together.

But when asking prices rise, but selling prices don’t, it almost always shows a surge of optimism - or the hopes of sellers that times are improving for them - rather than any real improvement in the market.

This is the reason why we give also the smaller, but more meaningful, Hass index, based on the actual sales prices of the sales we have made as a large estate agency selling apartments, town houses and villas in Nairobi.

We are very pleased that another partner is now working with us to add their own records of actual sales prices, to widen the scope of this index.

However, when we launched this index, we felt it was important to balance information about what the market was asking for in price, with whatever information we could give about what it was actually getting.

In this, we have shown already that the index was worthwhile.

Twice since launching the indices, we have seen asking prices surge, by more than 3 and then over 7 per cent in a single quarter, which amounts to the equivalent of more than 12 and 25 per cent price growth in a year.

Both times, the selling prices were barely moving. And both times the asking prices then dropped again.

If we are to see a new take-off in house prices, we shall see it in actual selling prices.

In this, the price movements in the second quarter have been small, but we are very encouraged by them, as the third consecutive rise in quarterly selling prices.

This suggests to us that the dip in selling prices at the beginning of 2009 is now firmly behind us.

Based on the changes over the last 18 months, we believe the housing market has moved into a more stable state, based on better information, and a closer relationship between pricing and true demand levels.

We are also today issuing a special report on Kenyan housing as an investment based on house price gains alone, and compared to US housing as an investment, and UK housing as an investment.

What is clear is that residential housing in Kenya has been a phenomenal investment in international terms, and virtually unscathed by the financial crisis or Kenya’s own economic setbacks, even including the effects of changes in the exchange rates between the Kenyan shilling and the US dollar and British pound.

This makes sense, considering the stage at which the market is.

Kenyan home owners do not tend to be heavily borrowed. The market is still in its youth, with decades of growth ahead, where the British and American markets are far more mature. The growth of the middle class in Kenya is also fuelling property market changes in a way that is no longer happening internationally.

The resilience of Kenyan housing prices speak to the ongoing, underlying growth in the sector.

Finally, we issue today, the second quarter results for our new lettings index, showing the way that rents are changing. This index is drawn from all advertised rents across the city.

As we predicted very strongly last quarter, there has not been the surge in rents that some commentators were forecasting.

In fact, average new rents fell very marginally, by 0.2 per cent between the first and second quarter.

We continue to believe that there is little upwards pressure on rents. The market is well served, and supply continues to expand at, or faster than, demand.

For this reason, we continue to urge care for investors looking to buy properties to rent out, and attention to the returns they will get at current rent levels.

The growth area in the housing market at present is in new home-owners, with more middle class home buyers entering the market with housing finance and mortgages to assist in their purchasing, whereas previously, most properties were being bought by upper middle class Kenyans with cash.

The new range of mortgage offerings and finance partnerships have been instrumental in supporting the market through the downturn, and in stimulating new and extended buying by professional Kenyans who were previously renting.

This, in turn, is freeing up rental properties, as tenants move on into home ownership, prolonging the period of flat rentals.

The pattern that is now emerging, across the entire property sector, and in comparison with other markets, is an encouraging one, showing a healthy housing market, which has also made a long-term correction in rental yields to a more normal level internationally.

House prices are stable. Rents are stable. But of the two, house prices are showing the first signs of potential, but moderate, price rises ahead.

Download the Hass Index Report Here: