Namibia Economist (Windhoek)

1 February 2013

Namibia: Housing and Other Lofty Storeys

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The latest housing price index released by FNB Namibia and based on September 2012 findings has shown that house prices are still on the rise. According to the report, the middle and upper price segments are becoming saturated which seems to be perpetuating the rise. It is suspected though that smaller towns within the country are contributing to large growths in housing development. Without bank financing, these effects are not reflected in the index.

The index shows that central property prices have continued to rise resulting in a whooping 38% increase in prices over the past 12 months. Coastal regions have shown volume growth despite earlier predictions of slowdowns. With an average of 11% increase in Henties Bay, Swakopmund and Walvis Bay, the coastal strip is fast becoming, similar to Windhoek, unaffordable to first-time home owners.

Northern house prices have dwindled over the past 12 months with a 33% decline in overall house volumes. Omaruru, Eenhana and Oshikango show promise with growth rates in excess of 30%. This is contributed largely by increased developments in middle and upper price segments but it was not sufficient to lift the index for the northern regions.

The south showed fluctuating prices but on average, declining house prices were the name of the game with month on month percentage drops of 26%.

Index compiler, Namene Kalili said: "Overall land delivery weakened due to supply weakness in the northern and central property markets since May 2011. A total of 20 stands were mortgaged during September with the coastal market responsible for the bulk of the mortgaged stands. At the coast 13 stands were mortgaged for an average price of N$121/m². Central land delivery remained weak with 3 stands mortgaged at N$139/m². Land delivery in the northern market decreased marginally to 5 stands mortgaged. Stronger land deliver numbers are expected going forward, particularly in the northern and coastal markets." This process however did not have an impact on the overall mortgage activity within the country which shot up by 12.7%. (The spike was supported mainly by mortgages taken out in Windhoek)

In conclusion, the index shows that for the foreseeable future housing prices will remain elevated. This is due to the increased demand in property but the slow delivery of available residential land. This feature although somehow more prominent in the lower price segment has a definite bearing on the overall house index. Kalili said, "There are only so many houses that can be supplied to the middle and upper price segment and we believe we are approaching that point as properties are taking a lot longer to sell and buyers are able to negotiate on price. As returns begin to decline in the upper price segments, supply will eventually shift to the lower price segment where properties sell much faster and are more likely to sell above the asking price because the demand in this segment is higher. This should result in house prices correcting themselves and affordability creeping back into the market. But given the slow turnaround times in land delivery and converting the land to housing, this process could take up to three years to materialise."

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