Housing demand eases as supply gradually gains traction
The second quarter of 2016 recorded a slight increase in house price growth while volume growth remained muted across the country. Daniel Kavishe, market research manager, FNB Namibia, said: “Despite the price growth, the overall trend for the first half of the year points towards a softening of housing demand as consumers remain jittery about participating in the property market, and as overall economic growth begins to tighten.
The Volume Index growth, which came in 10.95 percent lower q-o-q, indicates a weakening consumptive base as rising inflation, rising interest rates and slow income growth impacts spending.”
Kavishe added that supply restrictions continued to inhibit price movement which remained elevated across the country. This was corroborated by the latest housing data which revealed that central Namibia prices have tripled since the second quarter of 2010, while prices in the coastal towns and in northern Namibia have doubled over the same period. On an annual basis, however, the median price printed at N$850k, 6 percent higher than prices in 2015. The slower growth rate has been expected as property starts selling below or at valuation in the country.
At the end of June, prices in central Namibia increased by 15.63 percent quarter-on-quarter while volumes declined by 7.38 percent quarter-on-quarter. The overall median price for the region edged higher to N$1.3 million, supported by rising prices in Okahandja and Windhoek.
In Windhoek, prices increased by 20.73 percent quarter-on-quarter thus raising the median price to N$1.36 million. The suburbs with the fastest growth in prices were Wanaheda, Elisenheim and Academia, growing by 23 percent, 16 percent and 14 percent respectively. Okahandja and Gobabis, however, recorded a slower growth rate of 6.09 percent and 3.45 percent quarter-on-quarter respectively. Coastal volume growth remains in negative territory at -36.68 percent as transaction demand weakens in all segments of the market. Median prices across the three towns were N$1.25 million in Swakopmund, N$841 000 in Walvis Bay, and N$1.1 million in Henties Bay during the second quarter of the year.
Prices up north grew by 8.98 percent at the end of the second quarter, a lower growth rate as compared to the second quarter in 2015 which stood at 21.37 percent. Volumes grew by 22.81 percent quarter-on-quarter, reinforcing the north as the fastest growing housing market in Namibia. Specifically, volumes in Grootfontein increased 16.67 percent, while in Ongwediva and Oshakati, volumes have doubled over the past year.
Few residential properties changed hands in the southern parts of the country. However, the few that did trade during the second quarter of the year suggest volume growth declining by 16.67 percent quarter-on-quarter. Consequently, the median price increased to N$755 000 for the quarter, about 1.1 percent higher than the second quarter of 2015
Kavishe said: “The latest report from the Knight Frank House Price Index revealed that property price growth across the world has started to cool with increasing economic and political uncertainty creeping in. According to the first quarter 2016 report, the 12-month cumulative growth rate in the Housing Index increased to 3.4 percent at the end of March. Major concerns seem to stem from political uncertainty in Europe and America, while economic slowdown is the main culprit for lacklustre performance among most emerging market states. The high growth housing markets include Turkey, Sweden and New Zealand with growth rates well above 10 percent, while Ukraine, Taiwan and Greece are all experiencing a drop in property prices. Comparatively, Namibia’s first quarter data would rank it 6th in the world, with index growth recorded at 9.32 percent.”
In conclusion the FNB Housing index stated that the property market was expected to undergo structural changes over the next few periods as demand-side pressures ease and as supply gradually gains traction. The decelerating disposable income growth and the potential impact of any implementation of rent control are bound to reduce overall demand in both the investment and buy-to-live/let segments.
“However, changes in the regulatory environment merely address the symptoms of a much bigger problem, namely the structural supply challenges. In the short run, consumers are facing tighter monetary conditions with rising inflation and higher interest rates. The expectation of sluggish wage growth for the remainder of the year will further exacerbate affordability issues. Compounding these issues with the increase in cost of home ownership via rising property rates and taxes and higher utility tariffs, consumers delaying purchase decisions becomes expected,” explained Kavishe.
He said that with the drought increasing risks for developers and the long term implications thereof, FNB has seen a slowdown in overall housing construction.
“In this regard we have seen new house builds fall 21.73 percent over the first six months to a mere 65 houses completed in Windhoek. Despite the slowdown in new house builds, we revise our year end growth projection downwards to 10 percent from 13 percent.
Data from the third quarter will be pivotal in cementing this view, as coastal properties begin to seasonally moderate and a host of cost-effective houses from NHE and the mass housing program drive prices down, albeit temporarily.
Saturation in the upper price segment, along with a general slowdown in the middle price segment, will begin to drive developers towards the affordable lower price segment in 2017 and beyond. A rebalancing of the supply mix towards the less profitable segments will squeeze inefficient developers out of business as developer margins compress and volumes accelerate.”