Improved economic prospects in Angola due rising oil prices is expected to provide a boon for the Namibian property sector in the short-to-medium term with the probable return of Angolans for leisure and educational purposes, FNB Namibia has forecasted.
“In view of Angola being an important fraction of Namibia’s property market development, the rise in global oil prices are likely to improve economic prospects in that jurisdiction, resulting in a probable return of Angolans’ leisure and educational travels to Namibia. That, coupled with the expected rebound in domestic economic activity are likely to be the key tailwinds for the Namibia property market in the short-to-medium term,” FNB Namibia Market Research Manager, Frans Uusiku said.
He said the recovery of the country’s property market which has been hard hit by the negative economic impact of the Covid-19 pandemic, amid increased volatility on the supply of housing transactions due to forced sales, is under threat from rising interest rates.
“The observed volatility in the overall housing index also appears to highlight the high sensitivity of the Namibian residential property market to interest rates adjustments. This could be justified by limited affordability scope – with households’ debt to disposable income estimated around 89%. In essence, lending institutions are skating on thin ice from an affordability perspective, as the ultra-low-income market struggles to find affordable housing stock. Yet, this market is estimated to account for 70% of the total addressable market in Namibia,” Uusiku said.
“Suffice to say, the rise in interest rates present a critical risk factor for the development of Namibia’s real estate market, if not cushioned with increased public and private sectors’ spending towards land servicing and subsequently scaling-up the stock for affordable housing (below N$500K).”
This comes as the FNB residential rental index for the fourth quarter of 2021 posted a contraction of 0.7% , a position which Uusiku said highlights a significant improvement when compared to a contraction of 2.1% recorded a year earlier.
“These cyclical forces appear to have dissipated, as the real estate market reshapes, along with the reopening of the economy and resumption of a tight monetary policy cycle. Simply put, we are starting to see a return to a somewhat “normalized” positioning of the real estate market as the rental market continues to pick up steam,” he said.
