Windhoek
House prices in Namibia increased by a whopping 87.5 percent in the period 2010 to 2015, while volume growth only increased by 30.5 percent.
Interestingly the age of house buyers decreased, with 40 percent of buyers aged below 40 years. Five years ago the majority of buyers were still aged between 40 and 50 years.
Disposable income for the same period of 2010 to 2015 increased by 8 percent, which although suggesting high income for consumers, does not mean consumers are not struggling to pay their mortgages, according to the latest FNB Housing Index report.
The report says non-performing loans in the housing market is still quite low, and slowed down towards the end of last year, but singled out those in the age group of between 30 and 40 years as the “age group [that] seems to be under pressure … Non-performing loans seem to be high in this age group.”
“Volume-wise, most struggling consumers are from Khomasdal and Katutura but are ironically office-based workers or semi-professionals. Young professionals could potentially struggle if drastic and difficult decisions aren’t made to contain spending,” says the report by Daniel Kavishe, market research manager at FNB Group.
The report found that the deeds office recorded a 40 percent drop in transactions year-on-year due to a slowdown in purchases in the northern and central towns.
Transaction growth at the coast remained steady at 10 percent year-on-year supported by development in Swakopmund while in the south transactions at Lüderitz doubled due to the low cost developments in Lüderitz’s Benguela area. These transactions, combined with developments at the coast, pulled the median house price down to N$694 000.
Kavishe further took a look at Windhoek’s city centre which has also undergone major changes over the last few years. “Focusing on Windhoek, we find that the areas under demand have also changed. There has been a 63 percent increase in demand in areas like Academia while in Cimbebasia demand has dropped by 50 percent. Eros, Hochland Park, Dorado Park and even Rocky Crest are areas where demand has dropped by 55 percent, 41 percent, 23 percent and 27 percent respectively. However, we find that most consumers have opted to live in Khomasdal, Omeya, Elisenheim and Okurayangava. The preference in choice of living seems to be a pricing matter and this is supported with evidence from the growth across different sectors.
“Average volume growth in the lower segment has increased from -13 percent to 20 percent while in the upper segment it has dropped from 21 percent to -15 percent. Property between N$1 million and N$2 million is where the main growth sits – at 47 percent year on year,” says Kavishe.
The FNB Housing Index found the decentralization process more than wanting as there still exists a large migration from either smaller towns to the city or rural areas to the city.
The northern towns of Ongwediva and Rundu are fast growing but still offer reasonable prices for property. The median price in Ongwediva hovers around the N$500 000 mark while in Rundu it edges towards N$650 000.
Gaining popularity are the coastal towns as well with the median price in Walvis Bay standing at N$725 000 for stand sizes up to 400 sqms (square metres). Several areas in Swakopmund reflect a median price of N$900 000 but stand sizes are as large as 586 sqms. New home buyers must consider these towns as well before completely discrediting the housing market.
“I would like to say that the data suggests that a massive supply of low-cost housing over consecutive months would re-price the market downwards, thereby improving affordability across the country. Managing demand tactics will only mask the problem temporarily but won’t resolve the problem. The interest rate environment in Namibia is bound to change drastically over the course of 2016 and that will not bode favourably with the already indebted consumer. To put it in context a 0.75 percent increase in interest rates would change an individual’s monthly payment for their house by approximately N$518 on a N$1 million dollar bond. Irrespective of inflation and general economic slowdown expectations for 2016, consumers will face headwinds on the back of rising costs for servicing their debt. So save where possible and curb unnecessary spending,” says Kavishe.