Construction activities slow in April
Staff Reporter
Construction in Windhoek and Swakopmund experienced an approval contraction of 33.6% year-on-year in April 2023, according to Simonis Storm.
Between January to April 2023, an average of 151 plans were approved per month, whereas for the same period last year, 214 plans were approved per month. The decrease in building plan approvals is partly explained by City of Windhoek (CoW) receiving less plans. Year to date, CoW received 191 plans on average per month, compared to 222 plans received on average per month for the same period last year.
Building plan approvals have decreased by 33.6% year-on-year, from 283 plans in April 2022 to 188 plans in April 2023 for Windhoek and Swakopmund combined. The driver of this decrease is Swakopmund, decreasing by 53.7% year-on-year. Meanwhile, Windhoek experienced 23.4% less approvals in April 2023 compared to April 2022, with approvals decreasing from 188 to 144. However, on a monthly basis, Windhoek and Swakopmund’s approvals in building plans experienced a decline of 26.2% and 32% month-on-month respectively, resulting in an overall decrease of 27.7% month-on-month.
Similarly, building completions also remain on a downward trend. Completions decreased by 27.4% year-on-year in April 2023 compared to April 2022. Only 90 projects were completed, which is the lowest since July 2021 when only 43 buildings were completed across Swakopmund and Windhoek. These completions were concentrated in the residential segment of the market. The majority of building plan approvals in both Windhoek and Swakopmund were concentrated within the additions segment of the market, however, only composed 26% of the total value of plans approved, Simonis Storm pointed out.
Notably, 10 commercial and 70 residential plans were approved with the largest value of N$ 62 million and N$60 million respectively. The approvals amongst these three categories account for 97% of the total value of plans approved. In April 2023, there was a significant increase in the value of completed projects compared to March 2023, with a 48% month-on-month increase, albeit with only 90 projects completed in both Windhoek and Swakopmund. It is uncertain whether this increase was due to large or value-adding projects being completed, or if it was influenced by inflationary pressures. Of the N$94 million worth of completed projects in April 2023, N$75 million were residential, N$14 million were commercial, and N$5 million were additions. Lastly, the value of projects completed in April 2023 decreased by 19% year-on-year. Based on the current repo rate of 7.25% and prime rate of 11%, it is expected that elevated living costs will weigh on consumer demand and so affordability for new loans for buildings can deteriorate, resulting in a further contraction of the construction industry. The Bank of Namibia is scheduled to convene on 14 June 2023, and a 25bps rate hike is anticipated, which would increase the repo rate to 7.50% and the prime rate to 11.25%. As a result, the average home loan interest rate will increase to about 12.25% (prime plus one). Post the pandemic, corporate mortgage loan growth trended down while household mortgage loan growth recovered steadily, Simonis Storm said.
Between January to April 2023, an average of 151 plans were approved per month, whereas for the same period last year, 214 plans were approved per month. The decrease in building plan approvals is partly explained by City of Windhoek (CoW) receiving less plans. Year to date, CoW received 191 plans on average per month, compared to 222 plans received on average per month for the same period last year.
Building plan approvals have decreased by 33.6% year-on-year, from 283 plans in April 2022 to 188 plans in April 2023 for Windhoek and Swakopmund combined. The driver of this decrease is Swakopmund, decreasing by 53.7% year-on-year. Meanwhile, Windhoek experienced 23.4% less approvals in April 2023 compared to April 2022, with approvals decreasing from 188 to 144. However, on a monthly basis, Windhoek and Swakopmund’s approvals in building plans experienced a decline of 26.2% and 32% month-on-month respectively, resulting in an overall decrease of 27.7% month-on-month.
Similarly, building completions also remain on a downward trend. Completions decreased by 27.4% year-on-year in April 2023 compared to April 2022. Only 90 projects were completed, which is the lowest since July 2021 when only 43 buildings were completed across Swakopmund and Windhoek. These completions were concentrated in the residential segment of the market. The majority of building plan approvals in both Windhoek and Swakopmund were concentrated within the additions segment of the market, however, only composed 26% of the total value of plans approved, Simonis Storm pointed out.
Notably, 10 commercial and 70 residential plans were approved with the largest value of N$ 62 million and N$60 million respectively. The approvals amongst these three categories account for 97% of the total value of plans approved. In April 2023, there was a significant increase in the value of completed projects compared to March 2023, with a 48% month-on-month increase, albeit with only 90 projects completed in both Windhoek and Swakopmund. It is uncertain whether this increase was due to large or value-adding projects being completed, or if it was influenced by inflationary pressures. Of the N$94 million worth of completed projects in April 2023, N$75 million were residential, N$14 million were commercial, and N$5 million were additions. Lastly, the value of projects completed in April 2023 decreased by 19% year-on-year. Based on the current repo rate of 7.25% and prime rate of 11%, it is expected that elevated living costs will weigh on consumer demand and so affordability for new loans for buildings can deteriorate, resulting in a further contraction of the construction industry. The Bank of Namibia is scheduled to convene on 14 June 2023, and a 25bps rate hike is anticipated, which would increase the repo rate to 7.50% and the prime rate to 11.25%. As a result, the average home loan interest rate will increase to about 12.25% (prime plus one). Post the pandemic, corporate mortgage loan growth trended down while household mortgage loan growth recovered steadily, Simonis Storm said.
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