The Minister of Finance and Public Enterprises, Iipumbu Shiimi, has issued new regulations that provides for a further relaxation of restrictions on Loan-to-Value (LTV) Ratios, particularly concerning additional property purchases. As such, a mortgage loan for a second residential property no longer requires any deposit, while mortgage loans for third and subsequent residential properties only require a 10% deposit.
This regulation came into effect on October 31, 2023. The latest regulations replace the previously issued Regulations on Restrictions on Loan-to-Value (LTV) Ratios issued in 2019.
This regulation was introduced in an effort to reduce house prices through speculative buying for individuals seeking to purchase a second home. If someone wanted to purchase a second home with a home loan, they would have to put down a 20% deposit, for third house a 30% deposit and so on. These deposits are considerable amounts of money especially with house prices being already unaffordable.Â
The reality is that many individuals in the middle class initially invested in entry-level properties with their first jobs. Often starting with flats or small houses, as circumstances changed – with increased income and growing families—the desire to upgrade or relocate emerged. For example – if that bigger house cost N$ 2 million, you needed to give N$400,000.00 cash. That amount of money is just very difficult for most people to come by these days.
Before the implementation of LTV, individuals could place their property on the rental market if selling wasn’t an immediate option, allowing you to purchase a larger house. However, with LTV in effect, the acquisition of a second property became contingent on selling the first, leading to numerous individuals facing stagnation in a previously flourishing Namibian property market.
Pre-2016 witnessed properties selling rapidly, with the process of selling and upgrading proving relatively straightforward. Post-LTV implementation however, coupled with a slowdown in economic activity, particularly within the property sector, the market experienced a marked contraction.
Leonie Dunn, the Deputy Governor of the Bank of Namibia (BoN), emphasised that the revised regulations offer substantial benefits to both existing property owners and potential buyers. These regulations align with current economic conditions, necessitating a further easing while concurrently safeguarding financial stability. The overarching goal is to stimulate investment in the property sector, foster job creation, and contribute positively to economic growth and recovery.
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