Property prices remain subdued in early 2019
The FNB House Price Index recorded a contraction of 1% at the end of March 2019 compared to a contraction of 0.3% over the same period last year. Overall, the property market remains lacklustre, as the price index continues to hover in a negative territory.
According to Ruusa Nandago, Market Research Manager, the lower prices are systemic of the current economic environment, “We attribute this (House prices movement) to the prevailing recessionary environment, which has kept demand muted subsequently lowering prices.”
Meanwhile, the volume index has improved significantly to 31.6% y/y compared to 11.7% y/y over the same period last year. Ordinarily, negative property price growth translates to shifts in housing market dynamics as the trend bodes favourably for buyers. Furthermore, the landings of property following the completion of several mass housing projects across the country have contributed to increased transaction volumes.
“We have also noted that volumes have accelerated in the Northern and Central regions, possibly due to the completion and availability of housing units constructed under the mass housing project. Moving forward, we expect prices to remain subdued and volumes to tick up as more serviced land becomes available,” she added.
Transactions remain concentrated in the small housing segment where transaction volumes have picked up by 43% y/y. This is to be expected given construction under mass housing was concentrated in this segment.
“The large housing segment is the worst performer in terms of transactions this quarter, with volumes posting returns of -25% y/y. Upward price pressures exist in the medium, large and luxury segments, while prices in the small segment remain mute,” she said.
Transaction volumes in the Central region have accelerated significantly. The volume index was up to 38.7% y/y at the end of March 2019 compared to 2.2% y/y over the same period in the preceding year. This index has been climbing steadily throughout 2018, reaching an all-time peak of 44% y/y at the beginning of the first quarter of 2019. Property prices, on the other hand, posted a contraction of 8.2% y/y, with the average house price in the Central region now at N$1.33 million compared to N$1.46mn at the end of December 2018.
Coastal property prices expanded by 8.9% y/y at the end of March, a significant rebound from a severe contraction of 38.0% y/y in the previous year. This expansion brings the average property price to N$1.04 million compared to N$951K at the end of March. This is the first-time property price growth in the region has entered positive territory since 2017Q3.
Meanwhile, transaction volumes have continued declining from a peak of 76.5% y/y in the third quarter of 2018, reaching a new low of 22.7% y/y at the end of March 2019. In the same period last year, the Coastal volume index stood at 44.2% y/y. This downturn in volumes emanates from slowing activity in the small segment.
“We have noted, however, that sales activity in the large segment has improved significantly, with an increase of 38.1% y/y at the end of March 2019 compared to a contraction of -10.5% y/y at the end of March 2018,” she said.
Northern property prices are still growing albeit at a slower rate. Price growth is down to 0.3% y/y at the end of March 2019 compared to the March 2018 figure of 12.3% y/y. The average price of a property in this region now stands at N$919K. There is increased demand for residential property in the North – volumes have continued to climb, improving from 6.2% y/y in March 2018 to 43.4% y/y at the end of March 2019. Property development activities are expected to pick up in this region owing to the Oshakati Town Council’s plans to drastically reduce the number of informal settlements in the region by providing more formal housing.
Southern property price movements remain volatile. After posting growth of 33.8% y/y at the end of March 2018, property prices have recorded slower growth of 9.9% y/y at the end of March 2019.
The South is the only region in which the volume index was negative at the end of March 2019, recorded at -4.5% y/y. This is a considerable contraction compared to an expansion of 56.4% y/y in the previous year. It is important to note that transaction volumes in this region remain extremely low with few properties changing hands.
Nandago advised that FNB expected most activity to be concentrated in the small segment as bank financing becomes readily available to low and medium-income earners for the construction and purchase of PolyCare houses.
She added: “These houses, which are constructed using alternative sustainable materials, can be built within 10 working days at a much cheaper price. The National Housing Enterprise (NHE) has earmarked funds for the construction and upgrading of houses in informal settlements which will start in the Central region and later be rolled out to the rest of the country. In addition, the Oshakati Town Council intends to significantly reduce the number of informal settlements in that area with funds allocated to the servicing of land. Similarly, the formalisation of the DRC informal settlement is expected to commence this year. Thus, prices in this segment are expected to taper as more low-cost urban housing become readily available.”