Steady growth in house prices

STAFF REPORTER - The Namibian housing market appears to be at an inflection point, where pent-up demand and low interest rates are expected to keep sales activity at elevated levels as the economy continue to recover.

Releasing the latest FNB Residential Property Report yesterday, FirstRand Namibia’s market research manager, Frans Uusiku, said the FNB House Price Index has delivered steady growth since the second quarter of 2020, marking a 5-year double-digit growth record of 10.9% year-on-year (y/y) in September, up from 2% y/y in the same period of 2020.

As a result, the national weighted average house price came in at N$1 224 083, compared to N$1 204 691 seen a year earlier.

“The performance of the housing market continues to be underpinned by supply side factors such as shortage of affordable properties coupled with fierce competition amongst banks in keeping mortgage rates as low as possible,” Uusiku said.

“Young professionals continue to play an important role in driving sales activity in the lower end of the market - especially in the central region, while the large to higher end of the market is innately dominated by the buy-to-let investors,” he added.

SEGMENTS

The large housing segment recorded the highest quarterly growth of 8.3% y/y in prices, compared to a contraction of 9.2% y/y recorded this time last year. On a quarterly basis, an average house in the large segment is now estimated to be selling at N$4.392 million based on incoming sales data.

“As the case has been elsewhere, the added boost in sales activity in this segment may appear to suggest increased competition for high valued properties by those with adequate access to funding,” Uusiku said.

The small housing segment landed the second highest position in terms of quarterly house price growth of 5.3% y/y. In contrast, the luxury segment recorded a contraction in quarterly house prices of 3.2% y/y, which could be attributed to the inherent affordability issues.

According to Uusiku: “The elevated house price index growth was, therefore, foreseeable given the notable upsurge in residential mortgage loans, showing an average year-on-year growth of 4.6% on a year-to-date basis, compared to a 3.5% realised over the corresponding period of 2020. This is also the highest average growth level seen since 2017 at the beginning of the monetary policy easing cycle.”

REGIONS

The central region remains by far the strongest performer in terms of volumes traded, with the 12-month average volume index growth recorded at 35.6% at the end of September 2021.

“This highlights an improvement in the delivery of affordable housing and the increased participation of first-time buyers in the small housing segment,” Uusiku said.

In contrast, the coastal house price index landed lower at 5.8% y/y in September 2021, from the recent peak of 29.3% y/y in June 2021, but higher than -3.2% y/y recorded a year earlier.

Housing market dynamics in the coastal region appear to have stabilised somewhat, with the rebound in sales activity tilted towards the medium housing segment. This segment recorded a 12-month average growth of 764.6% in volumes traded at the end of September 2021, reflecting a considerable improvement from 69.7% and -55.4% in the corresponding periods of 2020 and 2019, respectively.

“This may suggest the revival of the coastal market as a sought-after jurisdiction for second homes and short-term leisure facilities. This is more so given that the in-bound tourism industry is still reeling from the impact of the ongoing global pandemic,” Uusiku said.

Overall, the 12-month average coastal volume index soared to 13.7% in September 2021 from -0.7% a year ago. Alongside, the coastal house price index printed a moderate growth of 13.7% y/y, up from 9.8% and -0.7% in June 2021 and September 2020, respectively.

The northern residential price index was down by 15.7% y/y in September 2021. This was the largest contraction recorded since April 2018 and points to weak sales activity recorded in the region.

The southern region continues to lag the rest of Namibia with respect to house price growth. The southern house price index recorded a contraction of 30.4% y/y in September 2021 compared to a growth of 22.2% y/y in the corresponding period of 2020.