Property for sale: from a seller’s to a buyer’s market

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Edgar Brandt

Windhoek-With houses for sale spending an average 24 weeks on the market (and 27 weeks in the upper income segment alone), the country’s residential property market has shifted from a sellers’ market to a buyers’ market and this has caused a notable drop in price growth, except for the coastal market.

Leading FNB analyst Josephat Nambashu says, “housing demand is faltering” and when the properties on the market eventually do sell, “98 percent sell below the original asking price”.

According to the latest FNB Housing Index, mortgage advances have consequently decelerated. Nambashu expects property prices to decelerate even further. “Based on our estimates, property price growth should decelerate to 6 percent in 2017 as a whole and improve to 7.8 percent during the course of 2018 on the back of mild economic recovery.

Although interest rates are unwinding, the expected deleveraging will keep price movements in check, with possible downside risks from the mass housing programme, as 1,942 mass housing units are ready for occupation and a further 4,012 currently under construction,” Nambashu stated in the summary of the housing index.

“As the economy gradually recovers, growth opportunities remain limited to the primary sectors, where mining and agriculture are rebounding from poor performances last year. However, employment and income growth is still constrained and, coupled with low consumer and business confidence, weighing on housing demand,” Nambashu added.

According to the most recent Knight Frank quarterly report, global house prices increased by 5.6 percent for the year to June. Iceland leads the index for the second consecutive quarter, after property prices jumped 23.2 percent year on year. Perennial leader, Hong Kong was not too far behind after registering 21.1 percent annualised price growth, followed by Malta with 14.6 percent price growth.

Said Nambashu: “The nearer term 6-month and 3-month data points suggest that the growth impetus is waning across most countries. By our calculations, Namibia slots into the 24th position, above Slovenia and three places above its neighbour South Africa. Namibia’s near-term data also points towards weakening growth”.

Central market: The average nominal value of residential properties jumped 9 percent in June compared to a year ago. After adjustment for inflation, house prices were still up, albeit marginal, in the small and medium categories, but were down in the upper income segment.

In the capital, prices were up 9.1 percent through June, with the average price now N$1,588,000. Gobabis saw house prices increase by 3.6 percent over the last 12 months to stand at N$775,000. In Okahandja – where volume of property transactions increased by 8.9 percent, thanks to the construction boom in that area, the average price fell by 1.5 percent over the year to stand at N$848,000.

Coastal market:
The continued growth in the region is driven by the strong growth in Swakopmund and Walvis Bay, which both grew by 22 percent on an annual basis. Walvis Bay’s N$1,259,000 average is third only to Windhoek (N$1,588,000) and Tsumeb (N$1,446 000).

Swakopmund, meanwhile, ranks just below its neighbour, with an average house price of N$1,164,000. The growth, however, comes largely from gains in the upper segment of the market, which rose 34.5 percent and outpaced other similar markets.

Southern market:
Southern property prices increased by 15 percent through June, while volumes remained almost unchanged and rather thin. In terms of segments, the market is predominantly active in small to medium segments, where prices rose by 16.2 percent and 29.4 percent respectively. Mariental led the growth, after posting 48.2 percent price growth, with prices now averaging N$568,000.

The lowest annual rate of change in that region was recorded in Keetmanshoop, where prices fell by 13.2 percent to stand at N$890,000.

“We must however warn that the volumes are rather thin and that low volumes in some main towns can lead to substantial volatility, as is the case with Mariental. Whilst efforts are made to account for this volatility, the change in price in these town levels can be influenced by the type and number of properties sold in any given period,” Nambashu cautioned.

Northern market:
Northern house prices dipped for the third consecutive month, to average N$835 000 through June. Oshakati and Rundu prices fell by 29.6 percent and 20.5 percent, respectively and as such had a strong bearing on the overall picture in the northern region.

“What is clear is that residential construction activities are on the increase in the northern property market and it is this supply growth, coupled with the weak economic backdrop that is pushing these property prices down.
“It remains to be seen whether this trend will precede a more widespread slowing of northern property prices. Initial impression is that it will, given the structural dependence of this market on government, which is consolidating its finances,” Nambashu said.

Overall mortgage advances contracted by 1.2 percent in June. This was driven mainly by the 2.4 percent decline in total value of mortgage advances for first bonds. Therefore, further bonds are on the increase and it’s this increase that has softened the decline in overall mortgage advances.

“Given the financial pressures consumers are facing, this trend in rising further bonds is evident in the northern towns of Eenhana, Ondangwa, Rundu, Grootfontein and Okahao, and more prevalent in the small to middle price segments,” Nambashu noted.

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