Average house prices up 13 percent to N$900K, even as volumes still decline

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Edgar Brandt

Windhoek – At the end of the third quarter of 2016 the average house price was pegged at N$900 000, 13 percent higher than prices last year.

According to the latest FNB Housing Index, covering the third quarter of 2016, the highest median prices recorded emanated from Henties Bay, Swakopmund and Windhoek, which stood at N$1.2 million for the coastal towns and N$1.4 million for Windhoek.

However, the 12-month cumulative growth in volumes remains negative at -20 percent, posing downside risks to overall market demand, which continues to soften.

Prospective homeowners prospects remain daunting as they wrestle with higher inflationary environment and a rising interest rate cycle and wage growth remains low, as companies try to contain costs within a constrained economic backdrop.

Most developers in the central area have stated weaker demand caused by both tighter credit control conditions from financiers and a cautious approach by consumers.

“We remain cautiously bearish about the property market, despite the price recovery during the third quarter. The limited supply around stand-alone units has kept the prices elevated across most regions, despite demand waning.

“We anticipate further weakness in demand in central Namibia, but improvements across the northern and coastal towns,” said Daniel Kavishe, market research manager at FNB Namibia.

In the affordable income bracket, where demand is highest, securing financing for alternative building methods is still pivotal in ensuring absorption into the property market.

These structures, once accredited for durability and tested for structural integrity, will add substantial supply to the market and would potentially cause prices to deflate further.

Looking forward, Kavishe estimated “house price growth to taper down to 10 percent at the end of 2016 with the potential to reach 13 percent.

The FNB Index shows that overall property prices rebounded in the third quarter of 2016, as the Index recorded a 27 percent increase compared to the same quarter in 2015. The growth was fuelled by central and coastal price inflation, as is seasonally expected during the third quarter.

“The movements were largely driven by higher prices in the upper segment – approximately 34 percent higher across the two regions – and faster than expected price inflation in the lower-end, approximately 23 percent higher across the two regions”, said.

The Volume Index remained in negative territory for the 10th consecutive quarter printing, 17 percent in the 3rd quarter of 2016, as transaction demand staggered across the regions.

The narrative remains the same, as the poor volume growth remains consistent with the weakening economy.

The FNB Index shows that prices in central Namibia continued to outperform the market with growth edging to 32 percent in 3Q2016, slightly higher than the 27 percent growth recorded in 3Q2015.

Volume growth remained in negative territory at -16 percent quarter on quarter (q-o-q) spurred by the decline in transactions in Windhoek. Across the capital city volumes are down 30 percent.

Specifically, volumes in Wanaheda are down 33 percent, 31 percent in Rocky Crest, and 66 percent in Otjomuise. Finkenstein has had the fastest volume growth for the quarter growing, as demand doubled at the end of September.

Volumes at the coast contracted by 46 percent as demand weakened across all segments.

Volume growth at Henties Bay slumped lower to -22 percent, while in Swakopmund and Walvis Bay volume growth declined to -53 percent q-o-q.

Median prices averaged N$1.2 million in Swakopmund, N$1 million in Walvis Bay, and N$1.1 million in Henties Bay during the third quarter after very high price growth in the major towns.
Prices increased by 16 percent at Henties Bay and 34 percent in Walvis Bay and Swakopmund.

Prices up north grew by 7 percent at the end of the second quarter, a lower growth rate, as compared to 3Q2015, which stood at 22 percent. Volumes grew by 10 percent q-o-q, a comfortable growth rate, considering declining volumes in both central and coastal towns.

Volumes in the region were supported by increased activity in Ongwediva with volumes doubling since last year. Property appetite also increased in Rundu by 82 percent q-o-q, as the area becomes a hotspot for development.

The median price doubled in areas like Rundu, Tsumeb and Otjiwarongo. Grootfontein and Eenhana have both experienced price growth of 47 percent and 27 percent since 3Q2015.

Few residential properties changed hands in the southern parts of the country. However, the few that did trade during the third quarter of the year suggest volume growth declining by 67 percent q-o-q.

The current median price stands at N$640,000 for the quarter, 16 percent higher than house prices last year.

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