The Ministry of Finance has gazetted regulations lowering the deposit that second time homeowners can make on a mortgage bond as it seeks to spur the country’s property market which has struggled for over the past two years due to falling rentals and housing prices.
According to the regulations published in the government gazette, first time homeowners will still not be required to put up a deposit when they apply for a mortgage, while second home owners will now only be required to put down a 10 percent deposit for their home and 20 percent for a third home.
“These regulations only apply to residential properties with active mortgage bonds and outstanding balances, and residential properties which are not encumbered with a mortgage bond and without any outstanding balance are not subjected to these regulations,” Finance Minister Calle Schlettwein said.
“The purpose of these regulations is to set out the procedures for determining the loan-to-value restrictions when banking institutions extend mortgage loans to customers for the purchase of residential properties in Namibia.”
Previously, individuals who sought to buy a second property had to pay a 20 percent deposit on the property and 30 percent would be required on a third mortgage.
“If a banking institution extends an additional mortgage loan for an existing residential property already financed with a mortgage loan with an outstanding balance, and the additional mortgage loan is used to acquire an additional residential property with a different title deed, the additional mortgage loan is regarded as financing a second, third and subsequent residential property and is subjected to these regulations,” he said.
“A banking institution may not extend any credit or financing facility for fulfilment of down payment or to top up for the purchase of second, third and subsequent residential properties to fulfill the requirements of these regulations.”
The changes come just over two years after the apex bank announced that home buyers will have to put down larger deposits for second and subsequent properties in an effort to rein in speculative buying.
FirstRand Namibia Group Economist, Daniel Kavishe, early in the year forecasted that 2019 will prove to be a tough year for pricing in the property market, adding that new developments in the low-cost market will possibly take centre stage, dragging average house prices down.
In its June 2019 housing index, FNB, noted that the government plan to lower the deposit requirements, will do little to stimulate the country’s property sector, although it will provide much needed support to prospective homeowners.
The Bank of Namibia implemented the loan to value ratios (LTVs) as a way of reducing risks for the country’s banking sector a development which saw the country’s construction sector contracing by 18 percent in 2018 and by 25.6 percent the previous year when the bank introduced loan to value ratios for the first time.
The total mortgage loans of the banking sector as of 2018 stood at N$50,4 billion, which is about 52% of the total loan book of all the commercial banks.