Restricting the housing market

26 October 2012
Author   J.W. ASHEEKE

I read an article that says a law is under consideration, which will restrict the housing market by blocking sales of property to foreigners. 

This is being considered because foreigners buying houses are the reason that prices have risen above the means of most low/middle income working Namibians.  Removal of foreigners from the equation will, supposedly, solve the problem.
Question: is there quantifiable evidence that prices for homes in Windhoek and Swakopmund and other places are significantly affected by foreign purchasers or is it driven by increasing local demand?  The real estate industry, economists and home loan experts in banks need to weigh-in on this debate with technical information.
 We have to tackle the long-standing and major issue of providing quality and affordable low/middle income housing. 
Is it the correct solution to blame our inability to do so on foreigners rather than our own budget priority shortcomings?  Sorry, but I must ask if research has been done on this issue or is this ban on foreigners buying houses just a quick-fix band-aid?
I would think that it is better to move quite cautiously when considering interference in the market controlling any industry.  Remember the scientific theory – for every action, there is an equal and opposite reaction. 
What is the upside and downside of this remedy?  How shall we mitigate the downside? 
Here is my layman’s concern:  houses are an asset and have a value.  Rates and taxes, insurance and collateral/security against loans or credit are all hedged against the value of those assets. 
If the market is artificially controlled and prices/values are adjusted downwards, won’t people who own such assets lose significant amounts of wealth?  How can municipalities charge the same rates and taxes for a property that no longer holds the same market value?  I am no financial guru, I am just being logical. 
Let me illustrate my point further.  If a house can sell in the open market for N$1 million taking into consideration the pockets of the market, the quality of the house, and its location, then that house is pegged at that price (so is insurance and rates and taxes). 
But, if the market is limited to those who can afford to pay N$250,000, then that house, which was worth one million, may now only be worth N$250,000. What about the existing bond on such properties now at a lower market value?
What if someone owes more on a house than they can now sell it for?  What if that house was used as collateral for a loan based on the previous market value?  Yikes! I am no financial guru, I am thinking practically and scaring myself!
Have we considered what precedent is being set when GRN enters the market so directly, albeit for the public good and with positive intentions?  What slippery slope could we be entering? There are protections to force a drop in housing prices today; what else will there be to force protections tomorrow?
Consider this:  Many people can no longer afford water and electricity charges.  What about a law to cap monthly charges for water and electricity; anyone not qualifying for income tax, gets water and electricity free of charge? 
Consider this:  People need warm blankets at winter time.  So, here is a possible law:  one blanket per year must be sold to each Namibian adult for N$10.00.  
Many of us are tired of getting ripped off by bank charges left, right and centre.  So what about a law that says that banks can ONLY charge a single monthly service fee of N$50.00 per account? 
People need to eat to live.  So, let’s put price controls on food!  All bread must cost N$5.00 per loaf.  All milk must be N$1.00 for 1 litre. Salt, sugar, pap, and meme muhango must cost N$5.00 for 10 kgs.  Rice and potatoes must be N$5.00 for 10 kgs.
Of course these things are impossible and would destroy our economy.  I am being dramatic to make a point.  This is the slippery slope I fear we enter if, without serious research and consideration, we start entering markets and placing artificial blocks on who can buy what in Namibia (other than issues of national security or international treaties of course.)
No one does anything for free and nothing in this world is free. Everything has a cost and someone, somewhere, WILL pay it, sooner or later. 
The reality for all of us is that there are things that we can afford based on whatever we earn and things that we cannot afford – it will always be so. 
Making a one million dollar house cost N$250,000 to allow those earning in that income range a chance to own that house is not a solution that is viable. 
A plethora of laws designed to force commodities or property to be sold at prices that don’t fit the market or which are designed to adjust the market (no foreigners allowed), creates an artificial market.  This is unsustainable and could eventually weaken our economy. 
Look at the Greeks, the Icelandic, Irish, Italians, and Spanish, all looking for bailouts with German money because they borrowed without restraint, offered social programmes they could not afford, caved in to labour demands out of sync with markets, put laws in place to control the market and lived on dreams for far too long.  Should we follow that model? 
Instead of changing laws to find halfway solutions, let’s make the systems we already have work!  Until when will we build, on a massive scale, low/moderate cost QUALITY houses in Namibia? 
NHE is there with professional management, but insufficient budget.  Cutting off sales of houses to foreigners will not build one single home affordable for low or middle-income people. But, a fully-funded NHE can and will. 
What about local authorities with devolved responsibilities for housing?  What about the Build-Together programmes? Are these not mechanisms to get low/moderate income houses built and sold to Namibian families?
We have an entire ministry that has housing as a part of its portfolio.  Perhaps, options and plans they have for affordable housing have not been fully funded?  Let’s get quality house construction plans underway to eliminate the shacks that keep burning down and killing our people and get our hard working lower income citizens in decent, practical houses. 
We can build these houses if we make a national decision to do so.  Low income, government-subsidised houses can and should be restricted to allow purchase by Namibians at certain income levels to ensure that the targeted segment of our community benefits from this programme.
Why not finance this housing plan by finding and collecting stolen GRN money and using it to subsidise the building of these standard, but sturdy family homes.
Or, perhaps one additional percentage point can be added to VAT to go to an earmarked fund specifically and only for subsidising the building of low/moderate income family homes and subsidising municipality costs for servicing of land for new homes.
Blaming foreign purchasers of Namibian urban houses as the reason why there are not enough affordable houses available is not addressing the problem.  
By the way, how can our Investor Centre work so hard and so well to encourage and incentivise Foreign Direct Investment with one hand and the country passes laws which block those same foreigners from buying property and putting down solid roots in Namibia with the other? 
Oh and...there is the issue of RECIPROCITY.  How many countries will now block Namibians from buying any land or property in their countries the same way that Namibia blocks their citizens from doing so?  Just saying…
Let’s get busy and use the mechanisms we already have in play to solve the issue of our need for affordable, clean, safe, housing.

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