Faster growth in house prices experienced in third quarter

Namene Kalili, Senior Manager of Research and Development at FNB Namibia Holdings said global property prices were muted in the third quarter of 2014 on the back of even economic growth across the globe. “After lower than expected second quarter GDP growth and a slight  improvement in volumes, the FNB house price index continued to bounce along the top through September 2014,” he said. “House prices averaged N$768,000, which is 21% higher than the same period last year as northern and coastal property prices increased during the month.

Coastal property prices remained under pressure for the third consecutive month despite unusually high prices in the upper price segment. And although Windhoek property prices remained under pressure leading up to the much anticipated municipal land auction in October last year, the remainder of the towns continued to post varying degrees of positive price growth,” he added.
With regard to volumes Kalili said that these moved upwards, but remained well below pre-financial crisis levels and were certainly not sufficient to meet demand. Furthermore, the volume growth was concentrated in sparsely populated markets, while the populous regions had sluggish growth.
On the topic of land delivery he mentioned that it fell well short of demand and although developers mortgaged a further 119,600 m² of land with a maximum yield potential for 280 free-standing homes, this increased developer activity has not yet translated into meaningful housing supply. When looking at the central property prices, the FNB housing index indicates that these were back on the increase through September, with prices rising 16.4% year on year.
The year to date data shows that Okahandja drove the price growth, while Gobabis prices were largely flat and Windhoek prices remained under pressure.
“Overall volumes continued to contract year on year on account of weaker volumes in the middle to upper price segments leading up to the much anticipated Academia land auction in October while supply in the lower price segment increased marginally,” said the FNB Researcher.
At the coast, property prices fell for the third consecutive month as the seasonal slump set in. Prices fell by almost 5.5% month on month to N$741,000. The decline was most notable in Swakopmund, where prices fell by 6%.
However, Walvis Bay and Hentiesbaai property prices remained buoyant and surprisingly higher than Swakopmund prices. Kalili ascribed this mainly to falling demand for large coastal homes, as volumes fell by 25%, while demand in the middle price segment continued to decelerate and contracting in the lower price segment.
In conclusion Kalili mentioned that although house prices continued to increase in 2014 at a much faster pace than the long term trend over the past seven years, demand continued to weaken in a number of regional markets and this is indicative that demand could not support elevated house prices or delayed house purchases leading up to the municipal auction in October. “Along with rising interest rates, we foresee continued deceleration in house price inflation for the remainder of the year, towards our 15% year-end forecast. However, above average economic growth, robust consumer demand and stronger mining exports may boost household incomes and ensure that property prices will remain elevated,” he said.