By: Nghiinomenwa Erastus
Using September 2021 prices, construction of a standard three-bedroom house should cost you on average N$616 886 in Windhoek, while in Keetmanshoop, it could cost N$407 940.
This includes labour, serviced land, and building materials.
Found First Capital in their latest report, House Building Cost Index, released this week.
For those planning to build in Windhoek, a serviced plot measuring 375 square meters in Windhoek’s Khomasdal suburb (considered a middle-income suburb) will cost 11 times more than the price of land in Keetmanshoop’s middle-income suburb.
Land accounts for 5% of total cost in Keetmanshoop, while it accounts for 38% in Windhoek.
Building materials remain the most significant cost component in the house construction value chain on average, accounting for 63% of total cost in Keetmanshoop, Rundu, Katima Mulilo and Ondangwa.
The report provides insight into previous prices trends and the impact of price
changes on building a house in Namibia.
COST OF LAND
According to First Capital’s assessment, the average prices of serviced land collected from recent transactions of local authorities with residents and the overall annual price changes.
Amongst the towns assessed, the cost of serviced land for an erven measuring 375 square meters is the highest in Windhoek.
While cheapest in Keetmanshoop, costing N$20,300, followed by Rundu costing N$30,050.
The exact land size would cost N$228 000 in a middle-class location of Khomasdal in Windhoek, making it the most expensive, followed by Swakopmund costing N$82 207.
First Capital researchers explained that though the average growth of land prices have declined from the 5-year average of 9% to 6% year-to-date, the land remains exorbitantly elevated, especially in Windhoek and coastal towns.
The higher demand can explain high land prices in Windhoek and coastal towns instead of the supply of land in these towns.
Other than land being costly in these towns, the rising supply deficit in land servicing and delivery puts pressure on prices.
Their assessment has concluded that “other than the mismatch between demand and supply of land, inefficiencies in servicing of land as well as speculative motives among private developers equally contribute to high urban land prices”.
Labour cost is traditionally charged based on the rate per time taken to complete a task.
According to the international benchmark, the total cost of labour should not exceed 35% per cent of the total cost of materials.
However, First Capital domestic experience indicted that labour costs exceed 35% per cent benchmark. Hence the report adjusts labour to 40% of the total material costs, inclusive of the profit margin for a building contractor.
Using the model of a 3-bedroom standard house, using September 2021 prices, labour is estimated to cost N$106 801.
The report also recognises that labour costs in some towns like Windhoek could slightly be expensive due to the extra workload in excavating rock surface ground to make a foundation for construction compared to the soft surface for foundation excavation in other towns.
The cost of building materials remains higher in northern parts of the country relative to central and southern regions.
The bill of quantity for building materials on a 3-bedroomed standard house using September 2021 prices recorded a combined average of N$267545 in Katima Mulilo, Ondangwa and Rundu, while the same materials averaged N$265,595 in Keetmanshoop.
For those buildings in Windhoek and Swakopmund, budget N$266 000 and N$265 700 for materials only, respectively.
The total cost of building materials in Keetmanshoop is N$2 950 less than the cost of identical materials in Katima Mulilo.
The differences in building materials cost by town reflects varying prices due to supply sources that are largely unique to every town.
The price increase of building materials was lower in Swakopmund and Keetmanshoop relative to central and northern parts of the country. This trend reflects the impact of transport costs on geographic areas distant from major imports entry points (Southern borders with South Africa and the coastal port of Walvis Bay).
First Capital researchers explained that the scope to increase spending on housing remains limited partly due to reduced revenue collections of these local authorities compounded by their notably reduced capacity to borrow.
Added to this is the limited fiscal space by the central government to fund local authority developments.
“These factors are expected to undermine the effort to deliver on housing and urban land development,” stated the researchers.
They added that persisting funding gap for land delivery and housing developments amid waning revenue collections and limited borrowing capacity of most local authorities calls for conventional funding options.
The options suggested can capitalise on the broader asset base of these local authorities, said First Capital. Email: email@example.com