The slight interest rate relief from the 25-basis points repo rate cut by the central bank in mid-August might lead to an increase in the number of building plans submitted and completed, as individuals and developers take advantage of the more
affordable credit environment. This is according to stock brokerage Simonis Storm (SS)
in its take on the latest building figures.
SS noted that the rate reduction signals a cautious yet supportive approach to stimulating economic activity.
After a prolonged period of elevated interest rates, the Bank of Namibia reduced the repo rate to 7.50% in August, which in turn brought the prime rate at commercial banks to 11.25%.
“This reduction could slightly ease the burden of living costs, potentially fostering greater consumer demand and making mortgage and other loans more accessible,” it said. The stock brokerage added that while the immediate impact of the rate cut on the broader economy will take time to materialise, the reduced borrowing costs may offer some relief to consumers and businesses.
Domestic construction activity in August 2024 remained modest in both Windhoek and Swakopmund, highlighting continued development in both regions. The SS report shows that Windhoek recorded an increase in approvals from 189 in July 2024 to 222 in August 2024, which is the highest on record for the year.
Swakopmund also saw a rise in approvals, increasing from 39 to 64 during the same period. From January to August 2024, Swakopmund municipality approved an average of 52 building plans per month, while Windhoek maintained a higher average of 178 approvals per month.
“The disparity between the two cities highlights Windhoek’s more robust urban development, though Swakopmund’s recent increase could indicate emerging growth trends in the coastal area,” SS added.
The brokerage further notes that for the year-to-date, the City of Windhoek received over 1 600 building plans, showing a marginal decline from the 1 633 plans recorded during the corresponding period in 2023. In August 2024, Windhoek registered 228 building plan submissions, slightly lower than the 233 received in July 2024. Swakopmund, on the other hand, recorded 353 submissions year-to-date.
Despite this rise in construction activity, the overall value of completed projects experienced a sharp decline as Windhoek finalised 151 projects in total, amounting to a cumulative value of N$67 million, which SS pointed out is a considerable drop of N$48.1 million from the N$115.1 million recorded in July 2024.
“The data reveals that most of these completed projects in Windhoek were additions (100) to existing structures, emphasising a stronger focus on property enhancements and upgrades rather than new builds. This trend may reflect ongoing economic caution, as property owners prioritise extending or improving current assets rather than embarking on large-scale new developments,” SS stated.
The brokerage also highlighted that the figures suggest development is concentrated in established residential areas, with more emphasis on improving living spaces and infrastructure rather than expansive new projects. “This focus on smaller projects and enhancements may also align with subdued economic conditions, as stakeholders await clearer signals from the broader economy, such as the expected impact of future rate cuts. Lower borrowing costs stemming from the recent and anticipated rate reductions could further incentivise smaller-scale investments and property upgrades.