The construction sector is contracting in Windhoek and Swakopmund after approvals fell by 8.0% month on month (m/m) in August.
This is a 15.7% year-on-year (y/y) decrease from August 2022.
For the year so far, there has been 20.6% less projects approved compared to the same period last year and 3.6% less than 2020.
Projects in the two locales in August decreased by 18.8% y/y, despite an increase of 39.4% in the prior month.
Windhoek, which had 72% of projects completed, decreased by 11.8% y/y, while Swakopmund, accounting for 28% of projects completed, decreased by 32.6% y/y in August 2023.
Although the number of projects has decreased, Simonis Storm’s researcher Angelique Bock said this is a positive sign for construction because it indicates that bigger projects have been completed, contrary to the prior trends of more additions and alterations completed, which small, low-cost projects completed.
“On a positive note, the value of projects completed saw an uptick in August 2023, driven by a higher value of projects completed in Windhoek (191.4% y/y increase), while Swakopmund weighed down on the growth (25.6% y/y decrease) in August 2023,” Bock said.
The two municipalities together recorded a combined value of N$147.9 million worth of projects completed last month, which is a combined increase of 89.1% y/y.
In contrast to what was completed, the value of plans approved has seen a significant decline of 71.0% y/y, driven by both the value of plans approved in Swakopmund which decreased 92.8% y/y and Windhoek by 61.7% y/y in August 2023.
Bock is of the view that the construction sector has shrunk due to a poor demand for new buildings.
This is after credit for mortgages by businesses decreased by 5.1% y/y and has only increased by a meagre 2.9% y/y for households in July 2023.
“This is evident by businesses being net repayors of their mortgage loans since mid-2022, indicating that new investments in buildings have been slow. The average mortgage loan demanded by businesses in 2023 so far is 9.1 percentage points lower than 2019, and 0.7 percentage points lower than 2020,” Bock said.
Meanwhile, tight financial conditions for households and businesses due to higher interest rates are leading to less demand for mortgage loans.