The continued slowdown of the economy is expected to continue impacting on the growth of the housing industry, FNB has said in its latest housing index.
FNB Namibia Group Economist, Namene Kalili, forecasts lower housing demand based on stagnating economic growth, waning consumer confidence, increased affordable housing delivery, increased land delivery, rising interest rates and rising home ownership costs, among other factors.
Kalili noted that properties in the luxury price segment are selling well below valuation and replacement costs.
“With these price pressures trickling down to the upper price segment, property is no longer the standout investment asset class it used to be.
“Additionally, the negative wealth effects amongst high net worth individuals will prolong the economic recovery as the top five percent income earners account for 36 percent of national consumption, and if they are not spending, the Namibian economy will not grow, and housing demand will remain weak.”
Kalili expects house prices to shed 5.8 percent of their value in 2018, with some price resistance in 2019, as housing becomes increasingly affordable to a select few.
“This will reduce the price contraction through 2019 to 1.2 percent, before turning positive in 2020, at which stage we believe property prices will have corrected and thus maintain inflation related price increases going forward.”
Taking about the residential market, Kalili said the segment has continued to struggle after July sales indicated that property prices contracted by 4.1 percent.
He said this means that property prices have contracted in six of the first seven months of 2018, to bring the average property price to N$1.29 million in July.
Price pressures were felt mostly at the top end of the market, after the luxury price segment was decimated by nine consecutive quarters of economic decline.
“Prices for luxury properties contracted by 64.6 percent year-on-year in July, and with limited demand at N$10.22 million (down from N$18.29 million in Dec 2017), we believe there is still more pain to come.
“As the luxury segment re-prices, this downward price pressure has begun to trickle down to the upper price segment, where we are starting to see more and deeper month-on-month price contractions, as prices slumped to N$3.6 million in July.”
On a more positive note, Kalili said property prices in the middle to lower price segment have risen between 3.1 percent and 5.3 percent on an annualised basis.
“Consequently, overall volumes have increased by 17.9 percent year-on-year on the back of robust volume growth in the lower price segment, where volumes increased by 28.8 percent year-on-year.”