FNB Namibia has just released the latest housing index for May 2016 and Daniel Kavishe, market research manager, FNB Group advises that the house price index growth has shown some recovery, compared to the first few months of the year, growing by 13 percent year on year at the end of May. He adds, however, that the volume index continues to show substantial weakening in the market recording a 14 percent decline in growth for the same period. The decline was specifically exaggerated at the coast recording negative growth of -42 percent y-o-y, and in central area where volume growth also contracted but by 12 percent y-o-y.
In terms of house segments, the largest decline in volume of transactions emanates from the high-end market (house prices over N$2.6m) where growth contracted by 46 percent at the end of May. Kavishe: “Prices in this segment, however, haven’t declined as one would expect with the extended drop in demand. Although high-end property price growth remains 22.4 percent higher compared to last year May, we expected lagged response to weakening demand in the segment.” The FNB Housing Index also states that the middle and lower segment continued to enjoy strong price growth recording on average growth of 18 percent at the end of May. Volume growth in these two segments however remained poor, down eight percent at the end of May. The negative volume growth experienced over the past six months across all segments suggests that the future property price growth will reign in to a more palatable 11 percent growth, but this is based on a rebound in volume growth.
Regarding the geographical split in the central region, prices continue to grow at 14.4 percent despite volumes declining by 12 percent y-o-y. Analysing Windhoek specifically, the median house price is currently N$1.3mn which is 10.5 percent higher than average Windhoek house prices in 2015. High income suburbs have begun to show signs of decline. In Kleine Kuppe prices have dropped by one percent, while Auasblick and Olympia prices have declined by 12.1 percent and 2.2 percent respectively. However, low income areas such as Okuryangava, Khomasdal, Katutura and Rocky Crest recorded strong price growth. At the coast, prices grew by 15.2 percent as volumes declined by 42 percent year on year. In the high-end of the market, no growth in property prices was recorded across the major towns. Growth, however, was recorded in property prices in the middle to lower segment of about five percent year on year. Swakopmund recorded the highest growth in prices (28.2 percent y-o-y) setting median price at N$1.2mn at the end of May. In Walvis Bay, prices grew by 6.2 percent setting the median price of a bonded house in that area at N$800k. Northern towns continue to grow favourably. Volumes increased by 23 percent at the end of May while prices increased by 14.1 percent to the new median price of N$605k. Katima Mulilo and Ongwediva drove the volume growth. In terms of prices, the respective towns grew by 30.1 percent and 17.3 percent at the end of May. Prices in Oshakati were down 21.5 percent while in Otjiwarongo, prices were down 22.8 percent. The decline in price growth is potentially seasonal, rather than an indication of a slowing market as average growth (in prices) in these areas for the year remains well above 10 percent.
In conclusion Kavishe believes that several dynamics were currently working simultaneously in the housing market. Other than the substantial drop in transactions at the high-end, and lower than expected activity at the coast, market prices seem to be slowing down in tandem with the rest of the economy, which decelerated to 3.5 percent growth in the first quarter. “After disposable income barely grew last year and two quick interest rate hikes this year, spending power has been eroded and therefore we expect house prices to decelerate to 11 percent growth by year
end. The higher end of the property ladder is expected to feel the brunt of this deceleration. Under these conditions, we expect a certain degree of downsizing, whereby property prices in the upper price segments decelerate and prices in the middle to lower price segment accelerate as we witnessed during the financial crisis of 2009. The anticipated increase in mass houses will provide additional downward pressure to property prices.”
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