Windhoek and Swakopmund construction experience an approval contraction of 33.6% y/y in April
Construction in Windhoek and Swakopmund experienced an approval contraction of 33.6% y/y in April 2023, according to the investment research firm, Simonis Storm Securities (SSS), Economist Theo Klein.
In a report for Building statistics for April released Friday, (January to April), Klein said year to date (YTD) an average of 151 plans were approved per month, whereas for the same period last year, 214 plans were approved per month.
According to Klein, the decrease in building plan approvals is partly explained by the City of Windhoek (CoW) receiving fewer plans. Indeed, YTD CoW received 191 plans on average per month, compared to 222 plans received on average per month for the same period last year.
Similarly, building completions also remain on a downward trend. Completions decreased by 27.4% y/y in April 2023 compared to April 2022. Only 90 projects were completed, which is the lowest since July 2021 when only 43 buildings were completed across Swakopmund and Windhoek. These completions were concentrated in the residential segment of the market, the report noted.
According to the report the majority of building plan approvals in both Windhoek and Swakopmund were concentrated within the additions segment of the market, however, only composed 26% of the total value of plans approved.
Notably, 10 commercial and 70 residential plans were approved with the largest value of N$ 62 million and N$60 million respectively. The approvals amongst these three categories account for 97% of the total value of plans approved.
In April 2023, there was a significant increase in the value of completed projects compared to March 2023, with a 48% m/m increase, albeit with only 90 projects completed (in both Windhoek and Swakopmund combined). It is uncertain whether this increase was due to large or value-adding projects being completed, or if it was influenced by inflationary pressures. Of the N$94 million worth of completed projects in April 2023, N$75 million were residential, N$14 million were commercial, and N$5 million were additions. Lastly, the value of projects completed in April 2023 decreased by 19%, the report further noted.
“Based on the current repo rate of 7.25% and prime rate of 11%, it is expected that elevated living costs will weigh on consumer demand and so affordability for new loans for buildings can deteriorate, resulting in a further contraction of the construction industry,” he added.
Klein said that the Bank of Namibia is scheduled to convene on 14 June 2023, and a 25bps rate hike is anticipated, which would increase the repo rate to 7.50% and the prime rate to 11.25%.
“As a result, the average home loan interest rate will increase to about 12.25% (prime plus one),” he said.
