Confidence in the property market is back after a slump in 2012, with home builders resuming construction of stalled projects and starting new ones as financing comes through.

Real estate firm HassConsult in its quarterly property index says that the last three months have seen buyers back in the market with hope for financing after the Central Bank cut its rate consecutively to the current 9.5 per cent.

"The final quarter of 2012 showed a sharp upswing in viewings and enquiries," said Sakina Hassanali, the head of research and marketing.

Many property developers halted projects as they ran out of funds and could not access refinancing when lending rates shot up on the back of a harsh monetary policy stance.

The Central Bank had in October 2011 raised its rate to 18 per cent, an historic high, to tame inflation and stabilise the exchange rate. But despite halting home buying activity, the high interest rates had little direct impact on house pricing, which remained relatively flat in the year.

"The sensitivity of buyers to interest rates, even in a largely unmortgaged market, has shown up very sharply in slowed sales activity and pricing in the last 18 months," Sakina said. HassConsult said hikes in asking prices for houses slowed down in the last quarter, only rising by 1.7 per cent in the quarter.

Asking prices for rents however climbed strongly in the period, posting a 4.1 per cent increase. This was driven by high demand coming from home buyers who had kept off the market waiting for better financing terms.

Rental prices have remained relatively flat in the two years before 2012. HassConsult says the increases may take some months to level out. "Overall, the picture is of a market returning to buoyancy," she said.

She said rental yields are now stronger after the rise in rents, and are expected to remain strong through 2013 "based on financial fundamentals" despite it being an election year.

"We anticipate some further rental increases, but that these will be concentrated in previously more economical areas and be of a lesser degree. In core rental zones, we now expect a levelling in rental rates," said Sakina.

The mortgage market however fell casualty of the high interest rates, with banks yet to respond to CBK rate cuts in the fourth quarter. "None of the mainstream banks offering mortgages has yet moved to cut interest rates after CBK cuts in the fourth quarter," said Caroline Kariuki, the managing director of mortgage brokerage firm TMC.

It is speculated that the banking sector may be acting cautious ahead of the elections, or banks may be profiteering out of the high rates which have created 'super-spreads'.