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Beyond Loss Aversion and Liquidity Traps: A Behavioural Stated Choice Analysis of Speculation, Over-Leverage, and Residential Housing Prices in Kenya's Affordable Housing Agenda

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  • Owuor, Charles Okeyo

    (Egerton University)

Abstract

The global residential housing crisis has increasingly been attributed to behavioural anomalies rather than purely rational market forces. However, the empirical integration of loss aversion, over-leverage, and liquidity dynamics within emerging African housing markets remains underdeveloped. This study advances a comprehensive behavioural framework for understanding residential housing price determination in Kenya, drawing on stated choice methods and prospect theory to analyse how loss aversion interacts with over-leverage and liquidity constraints to drive speculative price distortions. Using data from 234 real estate investors obtained through agents in Kenya, the study employs a multi-stage analytical approach, including hierarchical regression and mediation analysis, to examine how psychological expectations mediate the relationship between microeconomic indicators and housing prices. Findings indicate that locational attributes exert the strongest influence on housing prices (β = 0.846, p

Suggested Citation

  • Owuor, Charles Okeyo, 2026. "Beyond Loss Aversion and Liquidity Traps: A Behavioural Stated Choice Analysis of Speculation, Over-Leverage, and Residential Housing Prices in Kenya's Affordable Housing Agenda," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 7(2).
    • Handle: RePEc:cwk:ajocsk:2026-57
    DOI: 10.59413/ajocs/v7.i2.39
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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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