IN the latest housing index by FNB Namibia, Group Economist Namene Kalili noted that the stage has been set for lower housing demand.
Kalili highlighted that the lower demand for housing is based on economic growth stagnating, consumer confidence waning, increased affordable housing delivery, increased land delivery, rising interest rates, rising home ownership costs and the economy still shedding jobs.
He added that there is particularly concerns about price developments in the luxury price segment, where properties are selling well below valuations, or even below replacement costs. Kalili added that with these price pressures trickling down to the upper price segment, property is no longer the standout investment asset class it used to be.
Additionally, Kalili stated that negative wealth effects amongst high net worth individuals, will prolong the economic recovery as the top 5% income earners account for 36% of national consumption, and if they are not spending, the Namibian economy will not grow, and housing demand will remain weak. Kalili added that FNB Namibia expected house prices to shed 5.8% of their value in 2018, and to start seeing some price resistance in 2019, as housing becomes increasingly affordable to a select few.
“This will reduce the price contraction through 2019 to 1.2%, before turning positive in 2020, at which stage we believe property prices will have corrected and thus maintain inflation related price increases going forward,” he said.
Touching on residential market struggles, Kalili stated that it becomes apparent that the residential property market continued to struggle after July sales indicated that property prices contracted by 4.1%.
“This means that property prices have contracted in six of the first seven months of 2018, to bring the average property price to N$1.29 million in July. Price pressures were felt mostly at the top end of the market, after the luxury price segment was decimated by nine consecutive quarters of economic decline.”
Kalili detailed. On a more positive note, the index states that property prices in the middle to lower price segment drifted 3.1% and 5.3% higher on an annualised basis, supported by robust volume growth in the lower price segment, as government ramped up affordable housing delivery.
Consequently, overall volumes have increased by 17.9% year-on-year, on the back of robust volume growth in the lower price segment, where volumes increased by 28.8% year-on-year.