Construction crash impacts building plans approval

The ongoing woes in the construction sector which crashed due to a cut in projects expenditure by the government have caused a decline in the number of building plans approved within the Windhoek municipal area.

According to latest data from Simonis Storm Securities, by September 2017 building plans contracted by 12.8% YTD to 1 889 units, compared to a contraction of 23.0% YTD in the prior year (Figure 1). 

“On a monthly basis, building plans approved declined by 52.5% compared to an increase of 25.3% in the prior month.  Also, the number of buildings completed also contracted by 23.3% YTD to 345 units compared to a contraction of 30.8% YTD in September 2016 (Figure 1),” says the brokerage firm’s trainee economist Indileni Nanghonga. 

On a monthly basis, buildings completed remain muted in September 2017 following a contraction of 18.9% recorded in the prior month. 

 The data also shows that the overall contraction in the number of building plans approved was more pronounced in the category “Additions”, which contracted by 60.1% month on month.

In monetary terms, the value of buildings completed continues to contract by 21.8% YTD to N$389.0 million in September 2017, compared to a contraction of 18.9% YTD in the prior year.

 The reduction in the value of buildings completed to date could be partially explained by a declining trend in the level of inflation and may suggest stabilising house prices, says Simonis Storm.

The firm opines, “Given the dire economic state of the construction sector as evidenced by a significant contraction in the construction of new residential buildings, we believe that an additional interest rate cut may be justifiable to improve the status quo.”

Meanwhile, Simonis Storm has reported that mortgage loans remain low at 7.7% in August 2017, another indicator that households and corporates remain under pressure.