Interest rates to weigh on construction activities

PHILLEPUS UUSIKUInterest rates are expected to increase by 125 basis points (bps) in 2022, this will increase the prime rate from 7.50% to 8.75%.The rising interest rate environment will add further pressure on mortgage loan growth in 2022, especially for households who still have salary cuts or who face low job security, according to Simonis Storm.The first monetary policy announcement for the year by the Bank of Namibia (BoN) is expected to take place on Wednesday.According to IJG Securities, the City of Windhoek (CoW) approved 98 building plans in December, which is a 62.7% month-on-month decline from the 263 building plans approved in November and 14.8% year-on-year lower than the 115 approvals in December 2020. In value terms, approvals fell by 46.2% month-on-month to N$116.6 million. A total of 63 building plans worth N$317.3 million were completed during the month, representing an increase of 23.5% year-on-year in terms of number and 891.2% year-on-year in terms of value of completions. A total of 2,451 building plans were approved in 2021, 169 more than in 2020. In value terms, total approvals for the year rose by 5.9% year-on-year to N$1.96 billion, IJG pointed out.“Building plans approved is a leading indicator of economic activity in the country and the above data implies that the Namibian economy has shown some recovery in 2021 following the Covid-19 slump, it is still showing signs of hardship. The low number of commercial building plan approvals in 2021 is another sign of this and indicate that most businesses are not planning on expanding their existing operations,” IJG said.CoastIn Swakopmund, Simonis Storm pointed out that a total of 96 building plans with a value of N$55.8 million were approved during December 2021, compared to 54, with a value of N$34.4 million being approved during December 2020.During 2021, 690 plans were approved, compared to 500 in 2020, up by 38.0%. During December 2021, 45 building projects were completed with a value of N$42.7 million, compared to 28 projects with a value of N$16.3 million being completed in December 2020. These projects included 18 new residential projects with a value of N$10.8 million, 7 residential additions and alterations valued at N$2.8 million and 3 new flats with a value of N$2.7 million. During 2021, 442 building projects were completed, compared to 392 in 2020, up by 12.8%, Simonis Storm added.“Using the building statistics from Windhoek and Swakopmund as a proxy for the construction sector in Namibia, we do not believe 2021’s gross domestic product (GDP) figures will materially have improved from 2020’s levels, Simonis pointed out.“Annual mortgage growth has been far below long run averages, with household mortgages growing a net 6% on average and corporates growing at a net 1% on average in the last three years, compared to a net 13% and 26% respectively between 2005 and 2017,” Simonis Storm said.-phillep@nmh.com.na

Interest rates to weigh on construction activities

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Interest rates to weigh on construction activities

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