Home sweet home remains elusive

Buying an average house in Namibia at the end of last year cost 9.5% more than at the end of 2015 – the year before the economy entered a period marked by either negative or very low growth, exacerbated by the Covid-19 pandemic which hit in 2020.

According to the FNB Namibia House Price Index, an average house in the country at the end of 2015 sold for N$1.11 million. At the end of last year, the same house cost N$1 214 67. Calculating the figure, the financial institution smoothens average house prices are using a twelve-month moving average, with the national value computed as a weighted average of regional prices.

Commenting on the latest data, FNB Namibia economist Ruusa Nandago said buying activity in the residential property market remains broadly subdued across the board.

Data compiled by the Bank of Namibia (BoN) shows the drop in appetite for mortgage loans.

At the end of 2015, year-on-year (y/y) growth in mortgage credit granted to households was 12.5%. For business, the figure was 22%.

At the end of last year, household mortgage credit growth had dwindled to a mere 2.7%. The figure for business was -4.4%.

“The subdued buying activity is aligned with the elevated interest rate and inflation environment, which has weighed on consumer health in the context of high levels of indebtedness among households, currently standing at 86.0%,” Nandago said.

“This limits the ability for consumers to spend on assets such as housing, as the focus is on supplementing disposable income, which has come under pressure in the prevailing environment.”

Nandago said this view is corroborated by private sector credit extension numbers, which show that household mortgage credit grew by 3.0% on a 12-month rolling average basis in the last quarter of 2023, compared to unsecured credit, which grew by 11.1% over the same period.



National landscape

In the last quarter of 2023, the FNB House Price Index showed a 12-month average growth rate of 1.5%, a decrease from 3.3% the previous quarter and an improvement from -1.9% in the corresponding quarter in 2022.

Among different segments, small and medium segments experienced declines of 0.7% and -1.4% respectively, while large and luxury segments saw increases of 7.3% and 24.9% respectively.

Regionally, the coastal area exhibited the strongest growth at 8.8%, while the central, northern and southern regions reported growth rates of -2.5%, -0.2% and 6.1% respectively.

The national average house price in the last quarter was slightly lower than the previous quarter’s N$1 218 086, but higher than the same period in 2022, which stood at N$1 196 569.



Volumes

Transaction volumes continued to contract for the sixth consecutive quarter, with a 12-month average growth rate of -19.1% in the last quarter of 2023, compared to -27.7% the previous quarter and -17.9% in the same quarter in 2022.

This decline was widespread across all regions.

Among segments, the small and medium segments experienced contractions of -29.5% and -31.3% respectively, while the large and luxury segments saw growth rates of 20.0% and 0.0% respectively.

These figures indicate a generally subdued buying activity in the residential property market.



Central region

The house price index for the central region plunged further into contractionary territory, registering -2.5% on a 12-month rolling basis by the end of the fourth quarter, compared to -1.1% the previous three months and 3.8% during the same period in 2022.

The average house price in the central region stands at N$1.55 million.

Correspondingly, the transaction volumes index mirrored the moderation in prices, experiencing a contraction of 30.0% on a 12-month rolling basis, compared to contractions of 29.1% in the third quarter and 16.1% over the same period in 2022.

This weak activity was observed across all segments within the region.

In this context, volumes for the small, medium, large and luxury segments recorded 12-month average growth rates of -28.3%, -34.2%, 0.0% and -100.0% respectively.

The luxury segment recorded only two transactions over the quarter.

Despite the decline in prices and transaction volumes, the central region still accounted for the highest share of housing transactions in the quarter under review.

The share of housing transactions increased to 42.7% in the last quarter from 37.5% in the third, slightly higher than the 40.2% recorded during the same period in 2022.



Coast

The house price index for the coast showed a notable slowdown to 8.8% growth in the last quarter, compared to the robust 14.4% recorded in the previous one and the concerning -2.7% observed over the same period in 2022.

The average house price in the coastal region now stands at N$1.398 million.

Despite hopes for a rebound, the volumes index continued to languish in contractionary territory, registering a 12-month rolling basis at -10.9% in the fourth quarter. This marks a slight improvement from the 12.2% contraction in the third quarter, but remains below the -11.5% seen in the last quarter of 2022.

The ongoing lackluster performance was predominantly driven by persistently disappointing activity in the small and medium housing segments, which posted 12-month average contractions of 10.8% and 28.5% respectively in the fourth quarter of 2023.

However, there were contrasting figures in the large housing segment, which surged by 94.4%, while the luxury segment remained stagnant at 0.0%. It's important to note that both the large and luxury segments are characterised by thin volumes, making them susceptible to significant statistical base effects.

In terms of market share, the coastal region's share of housing transactions dipped slightly to 20.2% in the past quarter, down from 21.0% in the previous one, but still showing a considerable increase from the 15.8% recorded in the same quarter in 2022.

The coastal region's share of transaction volumes has been on an upward trend since May 2023, indicating potential shifts in market dynamics.



North

The house price index for the North showed a contraction of 0.2% in the last quarter on a 12-month rolling basis. This marks a shift from the 0.8% growth seen in the third quarter and the 1.0% contraction recorded over the same period in 2022.

This marks the first contraction observed in the region in the past 12 months.

The average house price for the North currently stands at N$864 000.

Echoing trends seen in other regions such as the central and coastal areas, the transaction volumes index also experienced a contraction on a 12-month rolling basis, declining by 34.0% in the last quarter. This compares to a contraction of 31.8% in the previous one and a growth of 8.1% in the last quarter of 2022.

Looking at specific segments, the small, medium and large segments recorded 12-month average growth rates of -34.3%, -24.8% and 66.7% respectively.

Interestingly, the luxury segment witnessed a remarkable growth of 800.0%, driven solely by one transaction. However, it's important to highlight the susceptibility of the large and luxury housing segments to statistical base effects.

Despite previously dominating housing transaction volumes, the northern region now holds the second-largest share, accounting for 35.5% in the last quarter, down from 40.5% the previous one.

This shift indicates evolving market dynamics within the region, Nandago said.



South

The house price index for the South demonstrated growth of 6.1% on a 12-month rolling basis in the last quarter. This indicates a slight deceleration from the 7.3% growth observed in the third quarter, but marks a significant improvement from the -1.4% recorded over the same period in 2022.

The average house price in the southern region stands at N$881 000.

However, despite the positive trend in prices, the transaction volume index contracted by 28.6% on a 12-month rolling basis. This compares to a contraction of 44.4% in the third quarter and 12.5% over the same period in 2022.

The southern region's transaction volumes remain exceptionally thin, with only 19 housing transactions recorded in the last quarter. Consequently, these figures are subject to large statistical variances, and movements in the volumes index should be interpreted with caution, Nandago said.

Specifically, within the region, the small segment experienced a contraction of -38.1%, while the medium segment remained unchanged at 0.0%. Surprisingly, no transactions were recorded in the large and luxury segments.

Despite its small share of housing transactions, the southern region accounted for 1.6% of all transactions in the last quarter, up from 1.0% in the previous one, but slightly down from 1.9% over the same period in 2022.

This highlights the region's modest but steady presence in the overall housing market landscape, according to Nandago.

The latest data on residential plot sales reveals a persistently lackluster performance, with a year-on-year contraction of 28.5% recorded at the close of last year. This marks a slight increase from the 27.4% contraction seen in the third quarter and the 25.8% contraction observed in the corresponding quarter in 2022.



Land delivery

The sluggish growth in land delivery is evident across all regions, with the sharpest declines noted in the central and northern regions at -33.1% and -36.7% respectively.

The coastal region also recorded a notable contraction of 18.5%, while the southern region experienced a more modest contraction of 2.0%.

These figures underscore the ongoing challenges facing the residential real estate market, with subdued demand for residential plots persisting across the country, Nandago said.

The data highlights the need for targeted interventions to stimulate growth and activity in the housing sector, particularly in regions experiencing the most significant declines, she added.



Brunt

“The residential property sector continues to bear the brunt of the elevated price and interest rate environment, as observed in weak buying activity across all regions.

“We maintain our view that the residential property market will remain constrained as affordability bottlenecks persist,” Nandago said.

Potential upside could result from the adjustments in loan-to-value (LTV) ratios and the impact of oil, gas and renewable energy activity at the coast, she added.

“Furthermore, we note that the recent national budget allocated N$700 million for the upgrading of informal settlements, land servicing and provision for housing allocated in 2024/25, which bodes well for the housing sector.

“To further stimulate housing activity from a policy perspective, the brackets for transfer and stamp duties have been adjusted for inflation, and the exemption level has been increased from N$600 000 to N$1.1 million to improve access to housing,” Nandago said.

“We maintain our view that supply-side issues remain a binding constraint on buying activity in the residential property market. An increase in the supply of serviced land and, consequently, housing stock is crucial for the growth of the residential property market,” she added.