FNB housing volume and value index retreated
In the latest FNB housing index Daniel Kavishe, Market Research Manager, FNB Group advises that the FNB volume and value index retreated in the eve of the fourth quarter 2015 as the housing market eased across the country.
He added that the deeds office recorded a 40% drop in transactions year-on-year (y-o-y) due to a slowdown in purchases in the Northern and Central town. Transaction growth at the Coast remained steady at 10% y-o-y supported by development in Swakopmund while in the South, transactions at Luderitz doubled due to the low cost developments in Luderitz’s Benguela area. These transactions, combined with developments at the coast, pulled the median house price down to 694,000.
“Taking a look at the last five years, we realize that Namibia’s housing market has changed considerably over the past five years,” said Kavishe.
“Volume growth has increased by 30.5% while prices have grown by an estimated 87.8% across the board. The rate of supply may need to triple to help ease price growth. GDP per capita and recent labour force surveys suggested that disposable income has increased by 8% annually across the different economic sectors suggesting higher incomes for consumers. This is further corroborated by the age of buyers for both cars and houses which seems to have dropped with 40% of market owners under the age of 40 while five years ago the market was supported by individuals between the age of 40 and 50,” he said.
Kavishe said, “Focusing on Windhoek, we find that the areas under demand have also changed. There has been a 63% increase in demand in areas like Academia while in Cimbebasia demand has dropped by 50%. Eros, Hochland Park, Dorado Park and even Rocky Crest are areas where demand has dropped by 55%, 41%, 23% and 27% respectively. However, we find that most consumers have opted to live in Khomasdal, Omeya, Elisenheim and Okurayangava. The preference in choice of living seems to be a pricing matter and this is supported with evidence from the growth across different sectors. Average volume growth in the lower segment has increased from -13% to 20% while in the upper segment it has dropped from 21% to -15%. Property between N$1mn an N$2mn is where the main growth sits – at 47% year on year.”
The FNB Housing index also takes a look at decentralization and notes that this process has been more than wanting. There still exists a large migration from either smaller towns to the city or rural areas to the city. Predominantly, this has created property hotspots within an area like Windhoek.
Up North, Ongwediva and Rundu are towns that are fast growing but still offer reasonable prices for property. Median price in Ongwediva is hovering in the N$500,000 mark while in Rundu it edges towards N$650,000. Gaining popularity are the coastal towns as well. In Walvis Bay, the median price is N$725,000 for stand sizes up to 400sqms. Several areas in Swakopmund reflect median price of N$900,000 but stand sizes are as large as 586 sqms. New homebuyers must consider these towns as well before completely discrediting the housing market.
Lastly FNB’ s Kavishe asked the questions of Who is really struggling? He answered and said: “Fortunately, current banking data suggests that most arrears are still within the unsecured spending areas. NPLs within the housing market are still quite low and additionally slowed down towards the end of last year. Volume wise, most struggling consumers are from the areas of Khomasdal and Katutura but are ironically office-based workers or semi-professionals. Young professionals could potentially struggle if drastic and difficult decisions aren’t made to contain spending.”
“The data suggests that a massive supply of low cost housing over consecutive months would re-price the market downwards. thereby improving affordability across the country. Managing the demand tactics will only mask the problem temporarily but won’t resolve the problem. The interest rate environment in Namibia is bound to change drastically over the course of 2016 and that will not bode favourably with the already indebted consumer,” he said in conclusion.