Hold on – it’s gonna be a rough ride…. A glance through the latest housing index – both the locally compiled index and international index – reveals that consumers worldwide are feeling the pinch in their pockets. There is simply no money as the world economy exhibits signs of continuous slowdown.
And Namibia is no exception. There are cautions that things would get tighter in the months to come. For Namibians this could translate into some people being no longer able to afford mortgages, those who were thinking of buying houses may find themselves putting it off until the burden on their pocket eases.
The inflations would stretch the wages to the extent they can no longer cover the necessities, and for many there are no expectations of salary increases, according to the latest FNB Housing Price Index.
There are Namibian towns that have been the hardest hit by the economic turbulences. In Oshikango, for instance, house prices fell by nearly 53 percent. A house that in 2014 was priced at N$1.1 million is now priced at N$425 000.
In Oshakati, a house that was priced at N$964 100 in 2014 is now priced at N$539 900.
It was not long ago that the FNB Housing Index of 2015 declared Oshakati as Namibia’s town with the highest house price increases in 2014 – as well as for the last five years. An Oshakati house that cost N$486 300 in 2009 was priced at N$964 100 in December 2014, while as a similar house in Windhoek priced at N$472 000 in 2009 was priced at N$900 000 in December 2014.
Namibia’s northern region appears to have the most towns that have registered the most declines in house prices, according to the most recent FNB Housing Index. However, as of the impact of this on the towns themselves Daniel Kavishe, who authored the report, says “it is too early to say”.
Other Namibians towns that registered declines in house prices include Otjiwarongo, Usakos, Oshikuku, Omuthiya, Okahandja, and Lüderitz.
“These towns still receive sizeable demand across the housing segments even though the growth may not be as high as previous years. Investment in property in the north will continue moving forward with more affordable value per square metre as compared with central Namibia,” Kavishe tells New Era Weekend.
Oshikango, for instance, benefited from increased activity at the border and generally has always had massive price volatility because the volumes of transactions were few between one or two houses.
“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. Compound 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,” explains Kavishe.
Kavishe nevertheless says there is anticipation for stable demand for areas like Rundu, Ongwediva, Ondangwa and Oshakati.
However, even when compared to other countries in the world, Namibia’s house prices have gone down dramatically.
Kavishe says a comparison of Namibia’s first quarter house price index growth data with the latest report from the Knight Frank House Price Index ranks Namibia at number six in the world. Which is good news, seeing that Namibia was at one point ranked as the most expensive country, up there with Hong Kong.
Nevertheless, property price growth across the world has started to cool with increasing economic and political uncertainty creeping in.
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.
Kavishe speaks of the property market as “expected to undergo structural changes over the next few periods as demand-side pressures ease and as supply gradually gains traction”.
And this is not only for prospective house buyers, who would have to contend with decelerating disposable income growth.
Contractors too would feel the pinch. “With the drought increasing risks for developers and the long-term implications thereof, we have seen a slowdown in overall housing construction,” Kavishe says.
The report notes that 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.
According to the report, new house builds fell 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,” the report said.
“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 down prices, albeit temporarily,” he says.