More houses bring prices down

The FNB House Price Index fell by a further 5.2 index points in November 2012 as the number of properties traded continued to increase. Namene Kalili, Manager Research and Competitor Intelligence at FNB Namibia stated, “A number of new developments pushed up the volume index and introduced new and cheaper housing stock in the market. The volume growth was spurred on by new housing developments in Okahandja, Walvis Bay and Windhoek.”
Kalili added that more importantly, volumes continue to recover in the lower price segment which struggled with structural supply throughout 2011. “For the first time in a very long time the central market is trading more properties than the monthly average back in 2007 and it is this supply which is lowering house prices for the moment,” he declared. At the same time, however, Kalili also advised that there was very little evidence of sustained volume growth over the short term to contain house prices for much longer and therefore house prices were expected to rebound once this flurry of new affordable housing subsides.
The central property prices continued to fall during November and this time by 8% month on month. According to the report, National Housing Enterprise was largely responsible for the decline in house prices as they added new housing stock to the lower end of the middle price segment. “Therefore medium term volume growth prospects for the central market remain weak, with limited support from developers as a mere 4,200m² of land was mortgaged during the month, capable of yielding 10 free standing homes,” Kalili said.
Regarding coastal property prices Kalili said these continued to weaken during November as monitored prices were down a further 5 points from the previous month. Kuisebmond’s development continued to shift the median price down, by increasing the supply of affordable housing stock. This was evident in Walvis Bay, where year to date median house prices fell to N$402,000. Henties Bay property prices also decelerated due to market saturation in the middle to upper price segments while Swakopmund median property prices increased on the back of increased supply of properties in the upper price segment.
“Northern house prices increased by 26% month on month, but this was merely statistical as none of the price segments recorded significant price movements and therefore volume growth in the upper price segment was responsible for the price increase,” Kalili said.  In the southern property market, house prices increased by 26% to bring the index back to the same level it was in September. Mariental and Keetmanshoop property were responsible for the rebound, as median prices increased by 13% year to date.
In conclusion, Kalili gave his view concerning the declining index, “We see this as a temporary correction as land delivery is not high enough to continue driving down house price. Furthermore, 19% of the price weakness emanates from the coastal markets seasonal cycle which should turn, three months down the line. Unfortunately there is very little evidence to suggest that supply will continue to increase over the short term and the economy has a massive housing demand that is rooted in structural supply weakness of vacant land. Therefore housing demand will remain high for quite some time and high demand causes high prices. But with that said, the medium to long term prospects are a lot more promising given the general increase in developer activity during 2012.”