Land inflation outstrips housing inflation
The land prices in Windhoek have increased to N$1,852 per square meter as suggested by FNB Namibia’s Senior Researcher Namene Kalili in a report he issued following the developments from the City of Windhoek’s property auction held on 16 October 2014.
“Upset prices in Windhoek have shown a worrying trend, increasing by 53% in 2012, 33% in 2013 and 30% in 2014. This has effectively increased minimum price from N$135 per square meter back in July 2010 to a whopping N$850 per square meter, in an economy with the second highest property inflation,” said Kalili.
The report said that when indexed and compared to the national house price index, land inflation outstrips housing inflation by a mile. Housing inflation appears flat in contrast to land inflation. Where property prices have increased by 128% over the past 4 years, upset prices have increased by 657%.
Kalili added that transparency around the key drivers of land servicing costs remained minimal while land costs continued to spiral out of control, thus making land more unaffordable. Therefore the NDP4 objective of a robust, effective and affordable housing delivery programme is quickly drifting away.
“Competition for land was brutal and the final selling price of N$1,852/m² exceeded expectations and bank valuations. A quick and dirty international comparison shows that residential land in the US averaged N$773,000 per stand compared to Academia’s N$1,102,308 price tag,” said Kalili.
On the auction of the Academia property Kalili said that although the auction was divided into two sections, to give the first time buyers a realistic chance to buy land, it was them that paid the most per square meter. The land in the first session appeared cheaper, due to the smaller size of the stands. Bidding started high at N$1,940/m², but quickly fell to N$1,800/m², where it hovered for the rest of the morning session. There were a few exceptions that breached the N$2,000/m² mark, before closing off the morning session with an N$2,404/m² bid.
The second session also started on a high note with a N$2,458 bid. Bidding remained above the 2,000/m² early on, but soon fell to N$1,600/m² towards the end, before closing the afternoon session at N$1,420/m². The final lot was the lowest price paid per square meter on the day.
Kalili said, “Market value for the land was approximately N$1,600/m² and therefore banks are likely to finance up to 70% of the valuation. In most instances, bidders overpaid for land at the auction and will have to finance the difference between valuation and selling price over and above the 30% deposit. On average, buyers will have to finance 40% of the purchase price out of their savings. Therefore a high proportion of these transactions are expected to fall through, especially amongst the first time buyers as they paid the highest for the land.”