Early signs of recovery in housing market
Although house prices have increased, other property prices remain under pressure after a series of annual falls over the last nine months.
The average house price is just over N$1.2 million and according to the bank’s analyst, Josephat Nambashu, after an increase of 0.8% year-on-year in June.
“The continued drop in the economy and the increased costs of living on the back of fuel increases remains a stark reminder that consumer spending remains under pressure, which is consequently depressing domestic property prices,” he said.
Josephat, having looked at the last three months, said that house price contractions have been decelerating; although, at 0.8%, it is too soon to declare that the market is out of the woods, as the volumes continue to shift towards the lower price segments.
“The single and biggest contributor was the lower price segment, which registered a healthier 7.1% year-on-year price growth. On the back of renewed demand in the lower price segment, volumes in this particular segment have increased by 24.5% over the past year.”
“In contrast, large to luxury segments remained the weakest, as volumes continue to dry up. In the last five months, only three transactions registered in the luxury segment,” he said.
It is furthermore stated in the June FNB Housing index, that overall volume ticked up by 17.4% on an annual basis, driven primarily by the lower price segment, and to a lesser extent, the middle price segment.
These findings are further confirmed by an increase in the average time on the market, now up to 25 weeks, a deterioration in our affordability index (meaning housing have become increasingly unaffordable) and properties selling further below asking price (9.3% below asking price).
When looking at the central property prices, in June, house prices rose by 0.3% year on year, as property prices in the upper price segments contracted by 6.6%.
However, in the lower and more affordable segments, prices increased by 8.3% over the same period, at a time when this segment has seen a 5.6% increase in volumes.
In the capital, property price growth decelerated further to 2.0%. Properties in this market are reported spending 27 weeks on the market while the investment market (buy-to-let) has also slowed.
The regional volume index picked up by 8.8%, with nearly all transactions falling into the low to middle price segments. The average house price in the region now stands at N$1,496,000.
House price growth at the coast remained negative, at -2.6% for the whole coastal region.
In Swakopmund and Walvis Bay, house prices fell by 12.8% and 18.7% respectively while Henties Bay bucked the trend with 6.1% house price growth. Price pressures emanated from increased housing supply after transaction volumes surged by 67.0% annually.
Low-income properties emanating from the mass housing programme and the aggressive land delivery continued to push coastal property prices down, at a time when property prices are seasonally strong.
So far in 2018 house prices in the northern market have kept their upward trend, albeit at a slower pace, reflective of the prevailing softness in the market. In June, house prices increased by 5.3% year on year.
While property prices were still on the increase in Ongwediva (+12.8%), Grootfontein (+10.5%), Otjiwarongo (+8.7%) and Outapi (+7.2%), house prices fell in Eenhana (-35.5%) and Tsumeb (-26.5%), while stagnating in Oshakati (-0.2%) and Ondangwa (-0.1%).
Volumes shot up by 6.3% over the year, more concentrated in Eenhana, Oshakati and Ondangwa, where property prices were either under pressure or stagnant.
Prices in southern Namibia were up 2.2% year-on-year while volumes shot up by as much as 60%.
This has meant that the number of properties traded in June has increased to 9 transactions, and therefore caution must be taken when interpreting these figures, though market dynamics are very much identical to those in the northern region.
Land delivery accelerated by 43% on average in the first half of the year, surpassing the 33% average for 2017.
The additional stands were mainly concentrated in the coastal and northern areas were larger stands of about 451m², and 791m² were recorded.
Walvis Bay and Swakopmund delivered the most land during June, whiles land delivery in the central parts of the country, edged up by 8% year on year.
This has resulted in over 700 new stands delivered over the first six months of the year, which is a significant improvement over last year’s figure.
Additionally, municipal plans approved have also ticked up, which is a further leading indicator that housing volumes should increase even further.
Josephat said that with economic growth stagnating and consumer confidence to wane, the most talked-about event in recent months is the fact that house prices have been falling.
“Given that the property market has lagged economic growth by 18 months, we still expect price pressures to persist until the end of 2019. While the 43% increase in land delivery is good news to those in the housing backlog, and that there’s going to continue to be downward pressure on house prices, the weak labour market and sluggish wage growth have dampened demand for housing. Additionally, cement prices have been falling, since the introduction of a second manufacturer in the market, which should provide further encouragement for developers to take advantage of the lower input costs.”
“All these factors point towards increased supply, which should add further downward pressure on house prices, as reflected in our quarterly estate agent survey, which shows that properties are selling 9.3% below asking price. Despite recent price developments, which we believe are premature, we kept our forecasts, for house prices to contract by 5.8% for 2018 and a further 1.2% in 2019,” he added.