Housing demand at coastal towns has declined by 20.8% year-on-year making it the deepest contraction when aggregated across all regions, the First National Bank (FNB) latest housing index shows.
The report indicated that coastal prices fell to N$1 253 000, followed by the southern region with -7.9% y/y to N$761 000, the central region with -4.0% y/y to N$1 564 000 and the northern region with the least contraction of 2.7% y/y to N$852 000 at the end of June 2022.
The FNB residential property index recorded a 12-month average contraction of 2.8% at the end of June 2022 compared to a growth of 4.7% at the end of the first quarter and 9.6% over the corresponding period of 2021.
“This sudden deceleration follows the onset of interest rate hikes in 2022, where Bank of Namibia has raised rates by cumulative 175bps over a period of 7 months. This further confirms our assumption that record low interest rates instituted in 2020 were supporting house price growth,” indicates the report.
The report further states that the rising inflation combined with increasing interest rates continue to put pressure on consumers, particularly as job opportunities remain limited and wage growth stagnates.
“The housing market has not been shielded by this as evidenced by the contraction in prices since November 2021. The housing market is one of the most important sectors of the market economy being at an intersection point of interest for a wide range of economic players, such as investors (both individuals and legal entities), developers, realtors, insurers, bankers, lawyers, etc. The slowdown in sales activity particularly within the small housing segment, which has historically dominated the market presents a huge risk for the development of the housing market and economic recovery in general.”
On the other hand, supply-side challenges have been at the core of the housing market dynamics, and waning demand on the back of deteriorating macroeconomic environment are some of the factors taking a toll on the market.
“This is justified by lower-than expected sales of houses within the small housing segment – an unusual development by historic standard. In effect, sales volumes within the small housing segment posted a contraction of 0.8% y/y in the second quarter of 2022, from a growth of 7.3%y/y recorded in the same period of 2021. Nonetheless, overall national house price has remained fairly stable, with the 12-month national weighted average house price recorded at N$1,173 059 in June 2022, compared to N$1,211,382 in June 2021,” the report emphasises.
“Beneath the surface of current conditions within the housing market is a growing concern about affordability and what constitutes housing affordability for both end-users and financiers across various price points. Admittedly, there appears to be no clear boundaries between the segments of the housing market above and beyond the house price categories from a market perspective. This could be ascribed to lack of up-to-date data on household income,” it adds.
Meanwhile FNB says periodic access to real time data on household income would be a critical indicator for residential market development and affordability particularly in the post-Covid-19 economic context.
In addition, the bank says independent segmentation of the housing market by developers is often marred by thoughtful marketing moves that influence the demand for apartments and their price.
“Thus, the higher the category of apartments, the greater the benefit of the developer. This approach continues to derail optimal delivery of affordable housing in our view. This calls for a more unified segmentation approach, while also ensuring that there is a periodic access to real time data on household income to guide targeted market interventions.”
