House prices to grow by 5% – FNB housing index forecast
With a downside risks in the wake of last year’s recession, the FNB Housing Index forecast says housing prices are set to grow by 5% to 6% throughout 2018.
The index indicated that house prices have increased by a modest 4% at the end of December 2017 and according to Josephat Nambashu, Analyst at FNB Namibia, the housing market performance in 2018 will be determined by economic fundamentals.
“While we expect growth to lift moderately, job losses to normalise and interest rates to remain as accommodative as possible, we are, however, of the opinion that the market could see stable or moderate improvement in house price movements through 2018,” Nambashu noted.
The average property price increased to N$1.1 million in December 2017, slightly higher than the same period in 2016. Nambashu said that moderate economic growth was expected in 2018.
“However, a forecast of 1.3% real GDP growth for this year is not any significant additional support for the housing market. Therefore, household incomes will remain under pressure and thus consumer and business confidence will remain weak. This will transpire into waning housing demand in the middle to upper price segments. From recent price developments, it is clear that size matters,” he added.
Nambashu explained that smaller will be better as it has been towards the end of 2017, as many aging homeowners downscale and distressed sales fuel smaller property demand.
“Hopefully mass housing will lift housing supply to the lower end and help manage segment price inflation. Rising housing demand in the lower price segment will regrettably not offset the waning demand in the middle to upper price segments and as such the housing market as a whole will remain depressed to an average house price growth rate of about 5.4% in 2018. Although macro fundamentals suggest property prices should contract at this stage of the economic cycle, the sheer size of the housing backlog, will likely keep overall property prices in the black,” he added.
Overall, transactions were up 16.2%, most likely boosted by increased supply of new housing stock at more affordable pricing. The FNB Estate Agent Survey revealed improved trading activity levels and rising discounts, even though distressed sales picked up.
The index notes that the country’s central region’s average house price increased by 8.7% through 2017 to N$1.5 million, well within the 7% to 10% range that prevailed throughout the year. In the capital, house price inflation index was up 7.7%, more evidence of a weakening property market.
Coastal property price growth converged to 2.9% to set the average house price at N$1.1 million, while house price inflation in the North posted a lowly 1.0% increase over the year, with the average price now N$799,000. Furthermore, southern house price converged to more realistic levels of 5.4% at the end of the year, speaking to the tumultuous 2017 beset by economic frailties.