Lower and middle segments drive volumes in residential property but overall prices remain depressed
While prices in the lower to middle segments have increased by 5.3% and 3.1% respectively over one year, prices for luxury homes have imploded by almost 65% which in turn has had a negative effect on the upper segment.
FNB Group Economist, Namene Kalili, said the negative wealth effect among Namibia’s top 5% earners, is having a major effect on the rest of the economy. “The negative wealth effects among high net worth individuals will prolong the economic recovery as the top 5% income earners account for 36% of national consumption, and if they are not spending, the Namibian economy will not grow, and housing demand will remain weak,” he stated.
Residential property prices have contracted for six of the first seven months of this year with the country’s average now down to N$1.29 million. This has led to a robust growth in volumes but only in the lower and middle segments. For instance, in the lower segment, volumes increased year on year by almost 29%, helping to support overall volume growth of 18%.
However, the lower and middle volume growth was not sufficient to offset the slump in prices which Kalili expects to continue for the rest of 2018, eventually shedding some 5.8% compared to last year. FNB expects price resistance to set in next year but has still pencilled in a further 1.2% adjustment for 2019. Only in 2020 does the bank expect overall prices to turn positive and then to follow the inflation curve.