Thorsten Schier
13 February 2009
FNB Namibia's housing index for the third quarter of 2008 shows that especially the affordable and middle-income housing sectors have taken a knock, down 31 per cent and 27 per cent respectively.
This puts overall demand 21 per cent lower than in the previous quarter.
The only increases have been seen in the luxury sector, where a few large purchases, especially in September last year, have pushed up the figures.
This has also meant that the month-on-month price index is slightly higher than in the last quarter, while the overall monthly growth rate is standing at close to zero per cent.
FNB Namibia's Manager for Research and Competitor Analysis, Namene Kalili, attributes this drop in demand particularly to the high food prices.
"Namibians spend about 30 per cent of their income on food prices. When prices are high, this means the lower-income bracket is less willing to buy houses."
Other factors he mentioned at a press conference held by FNB yesterday were the high fuel price, the recent high inflation rate and delayed demand for a municipal auction selling 133 erven to mostly first-time home owners.
But Kalili sees relief for home buyers in the dropping inflation rate and the expected further cuts in interest rates towards the end of the year. Namibia's inflation rate is expected to decrease from 10.9 per cent to 6,2 per cent, which Kalili says will result in "lower interest rates which will then stimulate the housing market".
He also sees the recent increases in housing allowances for civil servants as a positive sign.
"These people haven't had increases for three to four years and will be looking to move up the property ladder," Kalili said.
Worryingly though for Namibia's economy, people seem to have financed spending during last year's high interest rates with loans on their properties.
Kalili warned people to "plough back equity into their houses" and not take up more loans during these financially precarious times.
Default payments have already increased by 25% from last year, and Kalili says they will be watching the figures closely.
Defaults on mortgages were the root cause of the financial crisis in the US last year.
The bank also expects "subdued demand" for the fourth quarter of 2008.
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