5 April 2012

Namibia: Construction Slows Down

The number and value of building plans approved by the City of Windhoek fell for the second month in a row in March, latest figures show.

The number of plans approved (excluding walls and pools) fell to 186 plans in March from 210 in February representing a 11% month-on-month decrease and a 26% year-on-year decrease. The total value of plans approved followed a similar trend, decreasing by 29% both on an annual and monthly basis. The decrease was largely due to additions and commercial plans approved being much lower, Rudolf Kuschke an analyst with Simonis Storm Securities says.

Only 155 additions valued at N$37 million were approved compared to 177 plans valued at N$96 million the previous month. Commercial building plans approved were also low, with only three plans with a total value of N$1.5 million approved. Bucking the trend, however, were houses which saw 28 plans being approved representing a six-month high. The total value of these was N$69 million, representing the highest monthly value in 12 months.

Kuschke says the high value of approved plans is a reflection of the high building costs being experienced by the industry at the moment where houses approved in Kleine Kuppe and Auasblick are averaging N$2.6million.

Kuschke is of the opinion that the recent downward trend in the number and value of building plans approved might suggest that the marginal benefit of lower interest rates is diminishing. He argues that another interest rate cut will barely stimulate construction activity while an interest rate hike will most definitely result in a slow down.

Year to date, 622 plans have been approved, which is 15.4% lower than the same period in 2011. However, the total value of plans approved year to date reached N$387 million, with higher building costs leading to higher average values per plan slightly offsetting the decrease in the number of plans approved.

Total plans completed in March fell 49% year-on-year to 53 plans, compared to 159 plans completed in February. The total value of plans was 39% lower on a month-on-month basis and 71% lower year-on-year at only N$29 million. Of the 53 plans completed, 48 plans were additions to the value of N$19 million, while four plans were houses to the value of N$2 million and one commercial plan to the value of N$8 million.

"However, we do not feel that the completed building plans recorded are a good reflection of the actual number of buildings being completed in Windhoek, as a lot of people fail to submit their building plans for completion after the building is completed," says Kuschke.

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