The recent adjustment by the central bank to the loan-to-value (LTV) ratio regulations, effective as of 31 October 2023, has been welcomed as a significant boom in the construction sector.
It addresses a key impediment for second-time home buyers and contributes to the provision of much-needed housing for Namibians. The changes mean second-time home buyers now enjoy a reprieve from the obligation to pay deposits.
This is according to stock brokerage, Simonis Storm (SS), who in their latest building sector report noted that the Bank of Namibia’s move is anticipated to attract investments in the housing sector, fostering a positive impact on the property market and potentially stimulating increased demand.
Central bank spokesperson Kazembire Zemburuka recently stated; “A mortgage loan for a second residential property no longer requires any deposit, while mortgage loans for third and subsequent residential properties only require a 10% deposit.”
However, SS noted that despite the positive outlook, it is prudent to exercise caution; “The relaxation of these ratios may indeed spur further demand in the sector, adding momentum to an already recovering market. However, a noteworthy consideration is the potential consequence of increased demand on property prices. It should be acknowledged that while these changes aim to facilitate access to housing, the affordability challenge persists, particularly given the prevailing relatively high interest rates.”
SS added that the immediate impact of LTV relaxation on affordability may be limited but noted that as stakeholders navigate these developments, a balanced approach is crucial to sustaining positive momentum while mitigating potential challenges associated with heightened demand and affordability constraints.
Meanwhile, the SS report pointed out that in October 2023, Windhoek and Swakopmund combined saw 268 building plans approved, valued at N$333.2 million. This represents a 7.6% month-on-month (m/m) decrease and a 19% year-on-year (y/y) decline in approvals.
Completed projects for the month reached 180, making it the year’s second-highest monthly total and signifying an 89.5% y/y increase from the same month last year
In October 2023, the City of Windhoek approved 197 building plans, from an increase of 22 from September, marking a monthly growth rate of 12.6% m/m.
“Yet, this was a 29.6% y/y decrease compared to October 2022. The total value of these approvals was N$303.5 million, down from N$400.7 million in September 2023,” SS stated.
The brokerage’s breakdown of the 197 approved Windhoek plans for October 2023 reveals that 152 plans pertain to additions, five are commercial building plans, 22 are designated for new residential properties, 17 are for walls, and one is allocated for a pool.
For the year-to-date, spanning January to October 2023, just over 180 building plans received approval, collectively valued at N$1.6 billion.