Property market no home run

Jo-Maré Duddy – Nine consecutive quarters of negative economic growth have “decimated” house prices in the luxury segment in Namibia.Prices for luxury properties in July were 64.6% lower than a year ago, says FNB Namibia group economist, Namene Kalili.Releasing the latest FNB Namibia Housing Index, Kalili said with limited demand at N$10.229 million – down from N$18.298 million in December last year – “more pain is still to come”.“We remain particularly concerned about price developments in the luxury price segment,” he said. These properties are selling well below valuations and arguable even below replacement costs, Kalili said.As the luxury segment re-prices, this downward price pressure has begun to trickle down to the upper price segment, he said. As such, more and deeper month-on-month price contractions are evident with prices slumping to N$3.625 million in July, according to Kalili.“With these price pressures trickling down to the upper price segment, property is no longer the standout investment asset class it used to be,” he said.Kalili warned that the negative wealth effects amongst high net worth individuals will prolong the economic recovery in the country. The top 5% of income earners account for 36% of national consumption, he said. “As long as they are not spending, the Namibian economy will not grow and housing demand will remain weak.”National pictureKalili said property prices in Namibia have contracted in six of the seven first months of 2018. By the end of July, the average house price in the country was N$1.29 million.Central and coastal property prices contracted by 6.6% and 5.6% respectively, while prices in the North increased by 4.8%. In the South, negative growth of 6.2% was recorded.FNB Namibia expects house prices to shed 5.8% of their value this year. Next year will see “some price resistance” as “housing becomes increasingly affordable to a select few”. Kalili therefore anticipates the house price contraction to be smaller in 2019. Positive growth is forecast for 2020 as property prices are expected to have corrected. Inflation-related price increases are expected from then, he said.Land delivery, pricesKalili said cumulative land delivery for the first seven months of 2018 stood at 795 stands, higher than the 10-year average.Growth in land delivery is particularly evident in the northern and coastal property markets. They account for 85% of the new land delivery and all of the volume growth, he said.Despite the higher land delivery, land prices continue to increase. July’s prices were 31.5% higher than a year ago, Kalili said. This has pushed the average cost of land to N$780 per square metre, symptomatic of the pervasive housing shortage, he said.According to Kalili residential land is the most expensive in the central property market. Prices here averaged N$1 036/m², followed by N$863/m² in the North and N$774/m² at the coast.“In these markets, a 300m²-stand would cost anywhere between N$232 000 and N$310 000, hardly affordable for a country with an average household income of N$150 000,” he said.MortgagesThe latest stats from the Bank of Namibia (BoN) show individuals’ total mortgage debt stood at about N$38.1 billion at the end of September. This figure grew by about N$2.79 billion or 7.9% compared to September 2017.Mortgage debt represented nearly 68.3% of consumers’ total debt of about N$55.8 billion at the end of September. A year ago, it was 67.7%.Total individual mortgage debt grew by 7.9% on an annual basis in September, compared to growth of 6.9% for overall credit extended to individuals.Average growth of 7.95% was recorded in individual mortgage debt from September 2017 to September 2018. The average figure for overall credit extended to individuals was 7.05%.

Property market no home run

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Republikein 2025-12-04

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Property market no home run

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