Second quarter house prices soften
House price appreciation realised since the 2008/9 global financial crisis was associated with a corresponding growth in mortgages.
PHILLEPUS UUSIKU
The FNB House Price Index posted a contraction of 2.7% year-on-year at the end of June 2020, compared to contractions of 5.6% and 3.7% year-on-year recorded at the end of March 2020 and June 2019 respectively.
This brings the national weighted average house price to N$1 044 956 as at June 2020, says Frans Uusiku the market research manager at FNB in their latest residential property report.
“We believe that the attractiveness of the residential property market as an asset class will be dependent on the extent of economic recovery and subsequent revival of the rental market’, Uusiku pointed out.
House price gains were notable in the coastal and northern regions, registering growth of 8.0% and 6.0% year-on-year respectively. Meanwhile, double digit contractions in house prices of 10.8% and 13.8% y/y were recorded in the central and southern regions due to affordability issues, Uusiku added.
As a result, the elevated demand for land in the central region led to a 12-month average price growth of 14.2% per square metre at the end of June 2020, compared to a contraction of 13.0% year-on-year recorded over the same period of 2019. This can be ascribed to high bid prices offered for the purchase of land mainly by private developers, he said.
The report further states that although market sentiments may appear to point to further declines in house prices due to expected distressed sales, FNB nonetheless believed that the downward trend has seemingly reached its pinnacle for two reasons.
“Firstly, house prices have only registered an annual compounded growth of 6% since 2009, which is lower than the 9% growth observed in mortgages over the same period. Secondly, there is a 91% positive correlation between house prices and mortgages since 2009, Uusiku pointed out.
Financial crisis
This could imply that house price appreciation realised since the 2008/9 global financial crisis was associated with a corresponding growth in mortgages. Therefore, from a seller’s perspective, trading activity below the prevailing average price levels may prove difficult due to high level of indebtedness.”
With regard to the various regions Uusiku advised that central residential property prices contracted by 10.8% year-on-year at the end of June 2020 compared to a contraction of 6.1% year-on-year recorded over the same period of 2019, while house prices in the coastal region have remained buoyant, recording price growth of 8.0% year-on-year at the end of June 2020 compared to a contraction of 11.7% year-on-year recorded a year ago.
Land delivery
Northern house prices have rebounded from a 28-months long negative growth territory, posting growth of 6.0% year-on-year as at June 2020. The average house price in the northern region is now at N$871 000.
The southern region represents a very small fraction of the housing market, accounting for only 2% of overall transactional volumes since July 2019. House prices in the southern region contracted by 13.8% year-on-year at the end of June 20120 compared to a contraction of 5.1% year-on-year recorded a year ago.
Uusiku added that it was encouraging to see that overall land delivery grew by 23.1% year-on-year over the second quarter of 2020 compared to a contraction of 22.0% year-on-year recorded over the same period of 2019.
In the meantime, we see accessibility and affordability of housing to be highly concentrated within the small housing segment particularly in the northern and southern regions.
Looking ahead, immediate pockets of growth are likely to be realized through addition of new developments that respond to evolving levels of household incomes along with fast-tracking the pace of affordable land delivery,” Uusiku concluded. [email protected]
The FNB House Price Index posted a contraction of 2.7% year-on-year at the end of June 2020, compared to contractions of 5.6% and 3.7% year-on-year recorded at the end of March 2020 and June 2019 respectively.
This brings the national weighted average house price to N$1 044 956 as at June 2020, says Frans Uusiku the market research manager at FNB in their latest residential property report.
“We believe that the attractiveness of the residential property market as an asset class will be dependent on the extent of economic recovery and subsequent revival of the rental market’, Uusiku pointed out.
House price gains were notable in the coastal and northern regions, registering growth of 8.0% and 6.0% year-on-year respectively. Meanwhile, double digit contractions in house prices of 10.8% and 13.8% y/y were recorded in the central and southern regions due to affordability issues, Uusiku added.
As a result, the elevated demand for land in the central region led to a 12-month average price growth of 14.2% per square metre at the end of June 2020, compared to a contraction of 13.0% year-on-year recorded over the same period of 2019. This can be ascribed to high bid prices offered for the purchase of land mainly by private developers, he said.
The report further states that although market sentiments may appear to point to further declines in house prices due to expected distressed sales, FNB nonetheless believed that the downward trend has seemingly reached its pinnacle for two reasons.
“Firstly, house prices have only registered an annual compounded growth of 6% since 2009, which is lower than the 9% growth observed in mortgages over the same period. Secondly, there is a 91% positive correlation between house prices and mortgages since 2009, Uusiku pointed out.
Financial crisis
This could imply that house price appreciation realised since the 2008/9 global financial crisis was associated with a corresponding growth in mortgages. Therefore, from a seller’s perspective, trading activity below the prevailing average price levels may prove difficult due to high level of indebtedness.”
With regard to the various regions Uusiku advised that central residential property prices contracted by 10.8% year-on-year at the end of June 2020 compared to a contraction of 6.1% year-on-year recorded over the same period of 2019, while house prices in the coastal region have remained buoyant, recording price growth of 8.0% year-on-year at the end of June 2020 compared to a contraction of 11.7% year-on-year recorded a year ago.
Land delivery
Northern house prices have rebounded from a 28-months long negative growth territory, posting growth of 6.0% year-on-year as at June 2020. The average house price in the northern region is now at N$871 000.
The southern region represents a very small fraction of the housing market, accounting for only 2% of overall transactional volumes since July 2019. House prices in the southern region contracted by 13.8% year-on-year at the end of June 20120 compared to a contraction of 5.1% year-on-year recorded a year ago.
Uusiku added that it was encouraging to see that overall land delivery grew by 23.1% year-on-year over the second quarter of 2020 compared to a contraction of 22.0% year-on-year recorded over the same period of 2019.
In the meantime, we see accessibility and affordability of housing to be highly concentrated within the small housing segment particularly in the northern and southern regions.
Looking ahead, immediate pockets of growth are likely to be realized through addition of new developments that respond to evolving levels of household incomes along with fast-tracking the pace of affordable land delivery,” Uusiku concluded. [email protected]
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