Second time home buyers will deal with stringent conditions and higher deposit fees when accessing loans from banks in the future, as the Bank of Namibia (BoN) plans to control the concentration of loans in mortgages by commercial banks.
This is meant to allow opportunities to first time home buyers to access mortgage from banks without increased competition, which in some cases lead to speculative buying on the property market.
The Namibian home market has been a hive of cash buyers in the past, while those who can afford constant loans have knocked at the banks’ doors several times to get opportunities for extra houses and in turn, lease to tenants.
Assistant Governor of the Bank of Namibia Michael Mukete, admits that the demand for accommodation in the country is too high.
This according to him, has encouraged individuals to take loans to buy second homes in order to let them out.
This he said, this has pushed the prices up constantly and in future, second time buyers need to pay a certain deposit to banks before getting a loan as compared to first time buyers.
“The concentration of the banking industry loans in mortgage assets remains a concern and as such the BoN is currently investigating the potential usage of forward looking regulatory tools such as setting maximum loan to value ratios in granting loans for second homes. Practically the regulation entails requiring borrowers to make a certain deposit for second housing loan. This is one of the effective tools used by central banks to directly control the amount that can be lent against a given amount collateral,” Mukete said.
In Namibia, the housing backlog is estimated to be around 300 000 units and the situation has since been exacerbated by the non-availability of loans to medium and low income earners.
Land development is also a preserve of a few institutions especially banks as the ordinary populace cannot afford it.
Mukete argues that although the level of accessing loans from the banks need to be looked into, the central bank is impressed with the status of the banking and non banking financial services sectors, which he described as being on a sound financial footing.
“Notwithstanding the concerns of higher household indebtedness and concentration of mortgages, the financial soundness indicators show that the domestic institutions remain profitable and liquid as these institutions continue to hold more capitals required by the local regulatory and international guidelines. This indicates that the banking system as a whole is able to withstand various shocks,” Mukete said.
Although corporates seem to be improving the BoN seem to have taken a backseat on the worries of a increasing debt to individuals, which they raised alarm about last year that led to luxurious spending, which do not necessarily improve the economy’s performance.