DESPITE fierce competition at the City of Windhoek's recent property auction, where 800 registered buyers bid for 193 undeveloped erven, FNB Namibia economist Namene Kalili expects a "substantial" number of these properties back on auction because individuals won't be able to afford it.

Analysing the auction of July 23, Kalili said FNB Namibia is "a bit sceptical on the affordability of the selling prices", which ranged from N$350 000 to N$1,53 million, earning the municipality an estimated N$107,2 million in profits.

Borrowing money for undeveloped land from commercial banks is still tough, he said. FNB Namibia, for instance, finances up to 60 per cent of the purchase price.

"The City of Windhoek's five-year financing option will stretch buyers' cash flow, as they would repay roughly N$15 700 per month on average, while having to develop in two years.

"Therefore we expect to see a substantial number of these properties back on auction," Kalili said.

He felt more positive about the construction sector's participation in the auction.

"The construction sector has slowed down of late as building projects dried up in the wake of the global financial crisis. As a result, the sector has accumulated substantial cash balances on current and call accounts, thus putting the sector in a very good position to compete at the auction and revive a struggling sector.

"Therefore we expected strong developer activity at the auction as the sector's performance depends heavily on Windhoek's residential market as Windhoek accounts for 41 per cent of the national mortgage market," Kalili said.

Capturing the day's action, Kalili said prices started off strong at N$1,1 million for the first property and weakened over the next 20 properties sold, at which point the prices bottomed out and an erf was sold for N$312/m2 in Auasblick. Prices then climbed for the rest of the day, picking up momentum as bidding moved to Auasblick's Hunis and Ganas Street. It spilled over to Dorado Park's Harmonia Street, where panoramic views of the city's skyline drove prices to N$1 200/m2, Kalili said. Thereafter prices eased to the N$1 000/m2-mark as bidding moved to Rocky Crest and Kleine Kuppe.

"As could be expected, Auasblick fetched the highest prices on the day with an average price of N$727 000 per erf or N$643/m2, but their relatively large sizes of the erven resulted in the lowest prices per square metre," he said.

Surprisingly Dorado Park was in second place with N$694 000 per erf, but given the relative small size of the erven, this translated to N$1 200/m2, making it the most expensive properties sold on the day, Kalili continued.

"The view of the city's skyline and keen developer interest is suspected to be behind Dorado Park's high prices where sub-divisions are permitted unlike in Auasblick," he added.

Prices in Kleine Kuppe erven averaged N$500 000 an erf or N$955/m2, while the average price in Rocky Crest was N$383 333 per erf or N$843/m2. The one and only erf in the city fetched N$350 000 or N$1 076/m2, he said.

Kalili said prices fell per square metre as the erven got larger.

"This may be indicative of buyers avoiding larger properties, which were mainly in Auasblick, where minimum building requirements designed to protect the quality and standard of living in this high-income township do not permit subdivisions, wire fencing materials and reflective or shiny roofing material, to mention a few. Therefore cost implications of these restrictions on such large properties may have discouraged buyers," he said.

Commenting on the money that changed hands at the auction, Kalili said FNB Namibia estimated that the City of Windhoek spent about N$28,6 million to buy and service the erven.

"In this regard, it was a very good day at the office for the city, as they generated N$135 million on the day and using the estimated cost price, we estimate profits from land sales to be N$107,2 million or 7,6 per cent of the City's operational budget.

"But first the City must collect the money, with will trickle in over the next three to 60 months, assuming all buyers honour their commitments," he added.

Kalili said he expects an increase in land sales as the N$107 million cash injection accelerates land delivery in Windhoek.