Construction approvals in Windhoek and Swakopmund fell by 33.6% year on year in April 2023.
According to Simonis Storm Securities’ latest analysis, from January to April 2023, an average of 151 plans were granted per month, compared to 214 plans approved per month during the same period last year.
The report states the decline in building plan approvals is explained in part by the City of Windhoek (CoW) receiving fewer plans.
“Indeed, year to date CoW received 191 plans on average per month, compared to 222 plans received on average per month for the same period last year,” Simonis Storm stated.
Meanwhile, building plan approvals in Windhoek and Swakopmund have declined by 33.6% year on year, from 283 in April 2022 to 188 in April 2023.
According to Simonis Storm, Swakopmund is the primary cause of this decline, with a 53.7% year-on-year fall.
At the same time, Windhoek had 23.4% fewer approvals in April 2023 than in April 2022, with permissions falling from 188 to 144.
On a monthly basis, however, the report stated that Windhoek and Swakopmund approvals in building plans decreased by 26.2% and 32%, respectively, for a total fall of 27.7% month over month.
Furthermore, building completions continue to decline.
“Completions decreased by 27.4% year on year in April 2023 compared to April 2022. Only 90 projects were completed, which is the lowest since July 2021, when only 43 buildings were completed across Swakopmund and Windhoek. These completions were concentrated in the residential segment of the market,” Simonis Stormsaid.
The financial research firm said the majority of construction plan approvals in both Windhoek and Swakopmund were concentrated in the additional market, which accounted for only 26% of the total value of plans granted.
It also stated that 10 commercial and 70 residential plans with a total value of N$ 62 million and N$ 60 million were approved.
The value of completed projects increased significantly in April 2023 compared to March 2023, with a 48% month-on-month rise, despite just 90 projects completed in both Windhoek and Swakopmund, the firm said.
However, the firm stated that it is unclear if this increase was caused by the completion of major or value-added projects, or if it was influenced by inflationary pressures.
While the completed projects totaled N$94 million in April 2023, N$75 million were residential, N$14 million were commercial, and N$5 million were expansions.
The firm also reported that the value of projects completed in April 2023 decreased by 19% year on year.
According to Simonis Storm, based on the current repo rate of 7.25% and prime rate of 11%, it is projected that rising living costs will impact consumer demand, causing affordability for new building loans to deteriorate, resulting in further contraction of the construction industry.
The Bank of Namibia is set to meet on June 14, 2023, and a 25-bps rate hike is expected, raising the repo rate to 7.50% and the prime rate to 11.25%.
“As a result, the average home loan interest rate will increase to about 12.25% of prime plus one. Post-pandemic, corporate mortgage loan growth trended down while household mortgage loan growth recovered steadily.”