Staff Reporter
Windhoek-Persistently weak economic growth, rising unemployment and weak household disposable income growth have begun to weaken property prices in Namibia. This is according to the latest Housing Price Index (HPI) released by FNB Namibia.
“For the month of April, the average annual rate of growth has fallen to 7.0 percent in nominal terms, despite the very strong prices growth in the coastal and southern regions. When adjusted for inflation and according to new methodologies, the real house prices fell marginally by 0.8 percent and have been negative month to month since December 2016,” explained Josephat Nambashu, market research analyst at FNB Namibia.
Nambashu advised that across the country there were 16 towns with positive growth, while the list of towns with negative growth is increasing against a backdrop of persistently weak economic data.
“While subdued wage growth has likely contributed to the weakening of property prices, there is a general feeling of uncertainty concerning the performance of the market in terms of estate agent perceptions, suggesting that other macro measures from political and economic instability and solid supply additions of mainly apartments are compounding the headwinds in the domestic property market,” Nambashu added.
Evidently, the search for secure neighbourhoods with adequate amenities significantly influence the price dynamics in the capital. High-income suburbs such as Klein Windhoek, Academia and Olympia are currently enduring negative price growth, while Ausblick, Eros, Finkenstein and Kleine Kuppe are enjoying abnormally high price appreciation. This divergent trend is typical of a market in transition.
“Given the negative economic data, we do expect the high-income suburbs to trend downwards with more consistency. The middle-income suburbs are a bit more consistent, with prices increasing in the double-digit range, with the exception of Academia (-21.6 percent) and Hochland Park (5.7 percent).
“The decline in Academia is ascribed to the land that was auctioned in 2014 and as such should not be mistaken for weakening underlying fundamentals. Low income suburbs showed very divergent trends as well with prices increasing by as much as 24.1 percent in Okuryangava, while falling by as much as 4.5 percent in Wanaheda,” said Nambashu.
“During economic downturns, we generally see property prices in the lower income segments strengthening as households downsize, resulting in higher demand for low income suburbs.”
He explained that other than house prices, FNB Namibia can comfortably say that the current economic growth is reflected in every other national economic indicator, and the housing market activity is no different.
“For April, housing volumes were down by 6.9 percent, and although recovering from the November low, the rising unemployment along with disposable income pressures do not give us much comfort in continued recovery. Our Estate Agent Survey suggests that trading activity across the market is deteriorating and that properties are spending as much as 25 weeks on the market and particularly in the high-income space.”
Nambashu cautioned that with residential construction activity expected to remain subdued, transactions may deteriorate even further, while properties spend even longer on the market before being sold. He does however expect volumes to grow in the northern property market, but said this will certainly not be sufficient to stop the decline from the rest of the market.
“In conclusion, we wish to state that, after averaging 10.0 percent increase during the 2016 year, we expect growth to decelerate for the remainder of 2017. This view is supported by the weak economic data and the persistently low volume data in the housing market and therefore we expect the HPI to average 6.2 percent this year.
“During the year, we also expect coastal property prices to show some signs of weakness on the back of the dismal uranium price, coupled with increased land delivery. Increased housing supply will continue to put downward pressure on northern property prices.”
He added: “With mortgage extension decelerating, housing demand may become less buoyant and therefore supporting lower HPI of 6.2 percent. The only variable supporting property prices is the massive housing backlog, but its influence is also waning on the back of rising job insecurity.”