Recomposed index shows properties in the red since December 2016
Property prices grew by a nominal 7% in April this year compared to April 2016, but when adjusted for inflation, real prices contracted marginally by 0.8%, according to the Housing Price Index maintained and published by First National Bank.
Josephat Nambashu, FNB’s Market Research Analyst said this week that after the index methodology has been adjusted and recomposed, real house price gains have been negative since December 2016. He cautioned however, that the average annual growth rate is highly misleading, hiding several obvious anomalies as witnessed by the detailed analysis for the various regions as defined in the index.
Price growth remained robust in the coastal region with prices rising 25% in Swakopmund and almost 20% in Walvis Bay. The central region has moderated somewhat posting a 9.9% annual growth. The southern region increased by more than 10% but the data comes from only a few transactions in Mariental and Lüderitz. Keetmanshoop growth was negative with prices coming down by 6.7%
Average transaction volumes for all regions combined was disappointing, decreasing by 6.9% but not as bad as the low point of the cycle which was in November 2016. Similar to the pattern seen in the price growth data, transaction volumes are based on very few deals in some regions, making the index susceptible to unique distortions because of the restricted number of data points. For instance, despite the stellar growth in nominal value in Swakopmund properties, the number of properties sold in April decreased by 25%.
“Like the coastal region, southern property prices saw a double-digits growth to N$670,000 in the twelve months to April. Mariental and Lüderitz drove prices upwards, while Keetmanshoop prices contracted by 6.7%, and they have been in the red since January 2017. These figures are based on very thin trading volumes and should always be interpreted with caution. The persistently thin volumes contracted even further during the month, thereby raising the need to proceed with extra caution” Nambashu warned pointing out the shortcomings in the index when volumes are so low, that the aggregated result no longer reflect conditions in the broader market.
On price trends in Windhoek, Nambashu said, “the search for secure neighbourhoods with adequate amenities influenced significantly the price dynamics in the capital. High income suburbs such as Klein Windhoek, Academia and Olympia are currently enduring negative price growth, while Ausblick, Eros, Finkenstein and Kleine Kuppe are enjoying abnormally high price appreciation. This divergent trend is typical of a market in transition.”
“Given the negative economic data, we expect the high-income suburbs to trend downwards with more consistency. The middle-income suburbs are a bit more consistent, with prices increasing in the double-digit range, with the exception of Academia (-21.6%) and Hochland Park (5.7%).” he said.
“Low income suburbs showed very divergent trends as well with prices increasing by as much as 24.1% in Okuryangava, while falling by as much as 4.5% in Wanaheda” he said to illustrate the inherent anomalies in the index.
“Our Estate Agent Survey suggests that trading activity across the market is deteriorating and that properties are spending as much as 25 weeks on the market, particularly in the high-income space. We do however expect volumes to go from strength to strength in the northern property market, but this will certainly not be sufficient to stop the decline from the rest of the market” said Nambashu.
