By: Nghiinomenwa-vali Erastus
Various factors have been documented to be the leading causes of the country’s housing crisis.
Some of these are inadequate serviced land, urbanisations, lack of rural economic development, and fiscal consolidation while high prices of finished houses have also kept out a portion of the population from owning a house.
This as a report by the research and broker firm Simonis Storm Securities, titled “Namibia’s Property and Housing Market Overview”, released in August 2023, has provided some insights on the housing sector.
The report has highlighted that growth in urbanisation has outstripped the supply of formal housing and additional informal settlements.
The Shack Dwellers Federation of Namibia said 40% of Namibia’s population and 80% of Namibia’s urban population lived in shacks by mid-2022.
The World Bank estimates a housing backlog of 300,000 units, with Windhoek having a backlog of 84,000 units alone.
However, some industry experts are of the view that the backlog is as large as 500,000 units, according to Simonis Storm.
Namibia has seen many people leaving rural areas, resulting in the urban population growing by about 2% on an annualised basis between 1990 and 2021, whereas house prices have increased by 8.7% on an annualised basis over the same period
Simonis Storm attributes the soaring house prices to the shortage of houses for sale. As a result, multiple buyers who are interested in a specific property bid up the price.
However, despite seeing an increase in house prices, some agents indicate that buyers still hold the bargaining power and bring prices below valuation in many instances and so keep a limit on price increases, the research firm was told.
At the same time, prices of plots have increased due to the shortage of housing stock that is available to be sold.
Simonis Storm explained that to this end, prices are becoming less negotiable and are increasing for newly serviced plots and newly built homes or residential developments sold directly by the developers.
This is due to inefficient service from Town Councils and municipalities in supplying new serviced plots across the country, the researchers said, adding that landowners are overpricing their serviced land in light of renewed high demand at the moment.
The housing market – similar to tourism – is also one of the sectors with the widest value chains.
The building of a house benefits construction, engineering, architecture, building material retailers, manufacturers of building materials, manufacturers, and retailers selling household goods.
At the same time, the real estate agents connect the developers and buyers.
At the same time, banks, who hold the power to decide who gets a house through financing, are some of the main beneficiaries of the housing sector, with housing bonds that can go beyond 20 years.
The housing sector is also a good indicator of where the economy is and where it might go.
Simonis Storm’s assessment has shown that at independence, about 28% of the population lived in urban areas and this has increased to just over 50% by 2023.
According to World Bank data, about 50,000 individuals or 13,500 households migrate to urban areas each year, putting pressure on the housing supply.
The urbanisation is driven by periodic droughts and the structure of the Namibian economy which is mostly based on urban settings.
Simonis Storm stressed that government capital allocation as one of the factors that has worsened the housing crisis.
Indeed, between 2015 and 2022 the development budget only received 26% of total expenditure on average.
Going forward, development spending is forecasted to be 32% of total expenditure, however, this remains to be seen.
At the same time, there have been voices for the private sector involvement to help address the supply gap, through partnership.
Increasing the supply of serviced plots is the quickest solution to addressing housing affordability in Namibia, the research firm advised.
Data from the Deeds Office has revealed that house sales used to average 165 transactions per month during 1990 and 2000, and increased to a monthly average of 243 between 2000 and 2010 and 303 monthly transactions between 2010 and 2023.
Housing transactions were mostly executed in the central part of Namibia around independence, but this area’s share of all housing transactions has steadily declined since then, Simonis Storm stated.
In recent years, housing transactions grew the fastest in the northern area, with central and coastal transactions declining and southern transactions being flat.
Simonis Storm highlighted that due to the lack of data on salaries, it is not possible to be certain whether the average salary has kept appropriate pace with in-pocket inflation or house price increases.
The research firm added that the insights from their assessment seem to indicate that the average salary for Namibians has largely not kept pace with the rise in living costs, hence inequality remains high.
Using the latest data points in 1Q 2023, houses are most expensive in the coastal area (with the average house now being N$1.6 million), followed by the central area (N$1.5 million), the North (N$869 000) and the South (N$795 000).
A limited supply of serviced plots kept upward pressure on house prices.
The researchers explained that weak economic growth as a result of lower government spending, weak commodity prices, and a drought led to a rise in unemployment and weak salary growth post-2015, negatively affecting the affordability of purchasing houses. Email: firstname.lastname@example.org