FNB House Price Index indicates stagnant average growth
By Michel Haoses.
First National Bank (FNB) released the House Price Index report (HPI) for the fourth Quarter (Q4) 2023 revealing the northern region to be cheaper when purchasing housing and the coastal region when purchasing land.
The HPI recorded an average growth of 1.5% at the end of Q4 2023 compared to a growth of 3.3% at the end of Q3-2023.
The overall national house price now stands at N$1,214,674 during Q4-2023, slightly lower than N$1,218,086 in Q3-2023 but higher than N$1,296,569 in the corresponding period in 2022.
Furthermore, the average house prices for a central, coastal, northern, and southern stand at N$1,550,000; N$1,398,000; N$864,000, and N$881,000 respectively each experiencing growth of -2.5%, 8.8%, -0.2% and 6.1% while the average land prices per square meter for a central, coastal, northern and southern stand at N$866, N$576, N$797 and N$808 respectively.
The small, large, and luxury segments experienced growth at 0.7%, 7.3%, 24.9 respectively, and the medium growth of -1.4%.
Excessively high interest rates and high inflation have weighed on consumer sentiment aginst high indebtedness among households which currently stands at 86% of disposable income. This limits household ability to spend on assets and consumables as the focus is on protecting available income.
This view is affirmed by the private sector credit extension numbers showing that household mortgages grew by 3.0% on 12 12-month rolling average basis in Q4 2023 compared to unsecured credit which grew by 11.1% over the same period.
Consequently, transaction volumes remain contractionary for the sixth consecutive quarter, at a 12-month average growth of -19.1% at the end of Q4 2023, from -27.7% in Q3 2023, contraction volumes are broad-based across all regions.
FNB further maintains the view of inflation remaining moderate but sticky, and the cutting cycle commencing in the latter half of 2024 as rising default rates are observed buying activity is expected to remain constrained over the remainder of 2024 and the first half of 2025.
Additionally, to further simulate the housing activity from a policy perspective, brackets for transfer and stamp duties have been adjusted for inflation and the exemption level has been increased from N$600,000 to N$ 1,100,000 to improve access to housing along with the recent LTV (loan to value) ratio adjustments and 2024/25 national budget 700m allocation.
However, the residential property market will remain constrained as affordability bottlenecks persist.
