Land woes send economy into spin
Local financial service firms are of the opinion that the country will see economic growth slow up until next year and possibly beyond, due to decreasing building plans as approved by the City of Windhoek.
IJG said last week that the 12-month cumulative downward trend in the number of building plans approved, despite there being no water restrictions imposed on the construction industry, has lead building plans to fall to a level last seen in November 1997, with most of this drop happening during the last 18 months.
With little land left to develop around Windhoek amid a high demand, approved building plans for August declined by 687. A significant decrease when compared to the 1,759 plans approved over the same period last year.
“If the City does not implement policy reforms by making more serviced land available, the City could be sitting with severe strain as urbanisation continues,” IJG said.
In a seperate report by Simonis Storm Securities (SSS), the firm said it further mentions how two commercial projects were completed in August while only one out of 14 walls approved was completed in August 2016.
According to the IJG report, in the past the lack of available land has driven increases in property prices, but the limit of affordability is currently being tested, and thus property prices are unlikely to increase at an accelerated rate as seen previously. IJG’s report goes further, revising growth forecast for the construction industry for the year with an expectation of a 4.5% contraction. A total of 177 building plans were approved in August to the value of N$269.4 million. Since the beginning of the year, 136 less residential units were approved compared to 287 over the same period last year and 141 less than the yearly average since 2006.
The slowdown in the number of building plans approved has been largely driven by a lack of serviceable land in Windhoek as opposed to the popular belief that water restrictions in Khomas are causing developers to halt construction, IJG said.However, the dollar value of building plans approved on a year-to-date basis stood at N$1.403 billion in August, down only 0.5% or N$6.4 million over the same period last year. The number of building plans approved during August grew by 47.7% month to month but contracted by 12.3% during the same period last year to 192 approved building plans, according to SSS building plan report for August.
IJG also suggests that the lack of available land has contributed to a large extent to the number of additions applied for over the last 15 years as well as limiting the amount of new plans applied for.
“As property prices increase due to lack of supply so does the number of people living under one roof which may then lead to additional space added to existing buildings,” they added.
According to SSS, the number of building plans completed remained constant at 26 building projects in July to August 2016 but growing by 100% from 13 projects completed. Additions remained constant at 15 projects completed in August compared to 15 completed in July 2016. On an annual basis, additions grew by 114.3% compared to 7 projects recorded. Buildings completed for houses doubled compared to 4 projects completed in the prior year while, on a monthly basis it remained constant.
Meanwhile, additions for building plans, up until August this year, recorded a total of 935, 439 less plans compared to the same period last year and 466 less compared to the current year to date when compared to the 10 year average.