“House prices contracted for a third straight month in March by 8.8% y/y, the sixth contraction in the last seven months,” announces Josephat Nambashu, Analyst at FNB Namibia in the March edition of the FNB Housing Index. “The decline meant the price of the average home was cut by N$109,941 from what it was this time last year to N$1,136,030,” explains Josephat.
When disaggregated, property prices in the middle price segment stagnated, while property prices in the upper price segment contracted by 3.0% y/y. Conversely, property prices in the lower price segment increased modestly by 3.4% y/y. Additionally, year to date data shows property prices across 14 towns, including the capital Windhoek, contracted. Volumes however increased 11.7%, driven primarily by the new affordable housing supply and improved land delivery. Volumes in the lower price segment have consequently risen by 17.9%, while land delivery has increased by 58.0%, bringing partial relief to those in the housing backlog. Both the middle and upper price segment recorded volume increases as well, albeit minimal. However, transactions in the luxury housing segment have dried up, with only one transaction registered in the past four months.
“Given the likelihood of more affordable housing stock entering the market and the delayed reaction to the economic downturn, we expect property prices to retreat even further and remain under pressure for longer – allowing the market to correct after decades of exuberant house price inflation. Sellers seem to remain denial on pricing shifts, as 91% of homes sold in the period, sold for below asking price, which points to overly optimistic prices in an ultra-cautious buyers’ market”
Josephat elaborated by saying that Windhoek property prices fell for the second time in twelve months, whilst Okahandja prices contracted by as much as 13.7% y/y. “The coastal property prices fell for the ninth month in a row – this time by 38.0% y/y – as changes in the housing mix came into play. In contrast, the northern property price inflation is picking up after months of negative price growth. Property prices in this region increased by 12.3% y/y, their highest in
almost two years.
“House price growth has diminished, and the recent developments suggest that we are set to face price correction as affordable property supply increases at a time where subdued economic activity persists and labour uncertainty is high. These factors have curtailed housing demand, and with mortgage advances growing at a paltry 8.1%, property prices can only contract.” Josephat added that furthermore, with more serviced land entering the market, the price pressures would only intensify. “It is for these reasons we have revised our house price expectations to reflect a market correction after decades of robust house price appreciation. Although our econometric models do suggest a modest recovery in 2018, the housing market will take a bit longer to recover. Nothing economically looks very strong, just mildly better than where we come from, and as such, house prices are expected to contract even further through 2018. Current forecast points towards price contractions of 5.8% for 2018 as a whole, easing to 1.2% in 2019.”