By Hilary Mare
THE property market is expected to undergo structural changes over the next few months as demand-side pressures ease and as supply gradually gains traction, the FNB housing index has revealed.
The decelerating disposable income growth and the potential impact of any implementation of rent control are bound to reduce overall demand in both the investment and buy-to-live/let segments.
The index report further states that changes in the regulatory environment merely address the symptoms of a much bigger problem, namely the structural supply challenges and in the short run, consumers are facing tighter monetary conditions with rising inflation and higher interest rates.
“The expectation of sluggish wage growth for the remainder of the year will further exacerbate affordability issues. Compound these issues with the increase in cost of home ownership via rising property rates and taxes and higher utility tariffs, consumers delaying purchase decisions becomes expected.
“However, with the drought increasing risks for developers and the long term implications thereof, we have seen a slowdown in overall housing construction. Data from the third quarter will be pivotal in cementing this view, as coastal properties begin to seasonally moderate and a host of cost-effective houses from NHE and the mass housing programme drive down prices, albeit temporarily. Saturation in the upper price segment, along with a general slowdown in the middle price segment, will begin to drive developers towards the affordable lower price segment in 2017 and beyond. A rebalancing of the supply mix towards the less profitable segments will squeeze inefficient developers out of business as developer margins compress and volumes accelerate,” further explains the report.
The second quarter of 2016 recorded a slight increase in house price growth while volume growth remained muted across the country.
Daniel Kavishe, market research manager, FNB Namibia: “Despite the price growth, the overall trend for the first half of the year points towards a softening of housing demand as consumers remain jittery about participating in the property market, and as overall economic growth begins to tighten. The Volume Index growth, which came in 10.95 percent lower q-o-q, indicates a weakening consumptive base as rising inflation, rising interest rates and slow income growth impacts spending.”
At the end of June, prices in central Namibia increased by 15.63 percent q-o-q while volumes declined by 7.38 percent q-o-q. The overall median price for the region edged higher to N$1.3million, supported by rising prices in Okahandja and Windhoek.
In Windhoek, prices increased by 20.73 percent q-o-q thus raising the median price to N$1.36 million. The suburbs with the fastest growth in prices were Wanaheda, Elisenheim and Academia, growing by 23 percent, 16 percent and 14 percent respectively. Okahandja and Gobabis, however, recorded a slower growth rate of 6.09 percent and 3.45 percent q-o-q respectively. Coastal volume growth remains in negative territory at -36.68 percent as transaction demand weakens in all segments of the market. Median prices across the three towns were N$1.25million in Swakopmund, N$841000 in Walvis Bay, and N$1.1million in Henties Bay during the second quarter of the year.
Prices up north grew by 8.98 percent at the end of the second quarter, a lower growth rate as compared to the second quarter in 2015 which stood at 21.37 percent. Volumes grew by 22.81 percent q-o-q, reinforcing the North as the fastest growing housing market in Namibia. Specifically, volumes in Grootfontein increased 16.67 percent, while in Ongwediva and Oshakati, volumes have doubled over the past year. Few residential properties changed hands in the southern parts of the country. However, the few that did trade during the second quarter of the year suggest volume growth declining by 16.67 percent q-o-q. Consequently, the median price increased to N$755 000 for the quarter, about 1.1 percent higher than the second quarter of 2015.
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