The latest FNB House Price Index shows the depressed state of economy has had a negative impact on property prices, with Henties Bay being the hardest hit, with prices contracting by 37.5 percent.
Other towns in the coastal region were not spared, with Swakopmund recording a contraction of 15.8 percent and Walvis Bay prices contracting by 14.8 percent.
“The Coastal region is the weakest performer with property prices showing a deeper contraction of 11.4 percent compared to a contraction of 2.6 percent over the same period last year. While the small, medium and large segments record growth of 2.3 percent y/y, 0.7 percent y/y and 4.8 percent y/y respectively, this was counteracted by the lack of activity in the luxury segment in which no transactions have taken place since November 2017. The average house price in the Coastal region has consequently come down to N$1 025 000 compared to N$1 157 000 recorded in June 2018.”
Northern property prices also took a knock from the country’s weak economic conditions,
retreat 6.5 percent y/y, compared to a growth of 5.3 percent recorded over the same period in 2018.
“This contraction is driven by price contractions in the small segment of 1.9 percent, which offset growth in the medium and large segments of 3.0 percent y/y and 9.8 percent y/y. The average house price in the Northern region is now N$822 000, the lowest it has been this year. The average house price over the same period last year was recorded at N$879 000.”
At the end of June 2019, the central property prices showed a contraction of 6.1 percent y/y compared to a growth of 0.3 percent y/y observed over the same period last year.
“This contraction brings the average house price down to N$1.4 million compared to N$1.5 million recorded over the same period last year. The negative growth was driven by slowdowns across all segments. The small, medium and luxury segments of 1.9 percent y/y, 0.1 percent y/y and 27 percent y/y. Furthermore, growth in the large segment slowed down significantly to 4.9 percent y/y.”
The price index for the Southern region recorded the smallest contraction of 5.1 percent y/y compared to growth of 2.2 percent recorded over the same period last year.
“The average house price in the Southern region is now N$832 000 compared to N$877 000 recorded in June 2018 with this decline driven solely by a contraction in the small housing segment.”
FNB Namibia’s Market Research Manager, Ruusa Nandago said the continued contraction in housing prices is not a surprising outcome given the severely depressed economic environment.
“Our view is therefore that the risk of further declines in house prices remains elevated, as risks to the macroeconomic outlook remain on the downside and disposable income growth comes under pressure. While the rate of uptake in mortgage credit is still positive – recorded at 7.6 percent y/y at the end of June – we have noted that the overall trend in mortgage credit extension has been slowing. With consumer demand waning, we do not expect that the recently announced repo rate cut and the change in LTV regulations will turn the property market around.”
She said the bank was of the view that a significant overall improvement in the property market will largely depend on higher disposable incomes through increases in real wages.
“We do not see the situation in the property market improving given the depressed economic environment, the precarious unemployment situation and anemic consumer spending. We therefore expect the housing market to remain in the red, with any improvements are likely to be slow and gradual. We are of the view that a turnaround in the economy that will bolster real wage growth and consumer spending is the vital catalyst that is will place growth in the property market on a stronger footing.”