Namibia Records Second Highest House Price Growth in World

“House prices increased by 29 percent year-on-year to bring the First National Bank (FNB) House Price Index to 234.7 index points through June as house prices continue to increase in 2014 at a much faster pace than the long-term trend over the past seven years,” said Namene Kalili, Manager Research and Competitor Intelligence at FNB Namibia Holdings Ltd.

Kalili added that despite various policy interventions to increase new housing supply, volumes continued to trend downwards as fewer properties were traded from month to month and demand for properties continued to increase.

“It is this increased disparity between supply and demand that is driving house prices upwards so much so that Namibia had the second highest house price increase in the world after Dubai. At a median price of N$774 000, households must earn at least N23 000 per month to afford an average property. This is almost three times the average household income for urban households in Namibia.

“Based on our calculations, the income requirement for the lower price segment came in at N$15 000 per month. Less than 10 percent of the households in the country can afford a property in the lower price segment.”

The FNB housing index also stated that land delivery remained weak at 61 stands mortgaged through June, with the trend beginning to point downwards. Land prices were 23 percent higher and averaged N$140 000 for a 410msup2 stand.

A further 393 800msup2 of land was mortgaged by developers, with a maximum potential for 920 free standing homes, which brought the cumulative house delivery potential to 7 950 freestanding homes for 2014. However, developer activity had not filtered meaningfully into the new housing supply numbers as overall volumes continued to trend downwards.

When looking at the various areas in Namibia the housing index stated that central property prices increased by 20 percent year on year to N$810 000, with most of the upward price pressure coming from the upper price segment, where property prices rose by 32 percent year on year to N$2 333 000 per unit. Property prices in the lower to middle price segment also increased, but at more modest rates of between 4 and 14 percent year on year.

Coastal property prices increased by 25 percent year on year to a median price of N$956 000 and although property prices continue to increase, near term data shows that this price growth is tapering as the market moves towards its August peak.

Kalili said: “Coastal property prices tend to track the tourism season and hence coastal property price growth was concentrated in the upper price segment, where property prices increased by 28 percent year on year to end the month at a median price of N$2,223 000.”

Northern property prices increased by 28 percent year on year to end the month at a median price of N$530 000 on account of g price movement in the lower price segment. Overall price movements were further aggravated by a shift in volumes to the middle and upper price segment adding further inflationary price pressure in the northern property market.

Southern property prices increased by 287 percent year on year to end the month at a median price of N$702 000, but with five properties traded in the month, one should not read too much into this figure.

On the topic of land delivery Kalili said: “Despite Tipeeg and the mass housing project, land delivery struggled to find direction, with the near term data pointing towards waning land delivery. A total of 61 stands were mortgaged through June and although an improvement from the May figure, it was not enough to house the growing population and thus adding inflationary pressure to land prices which were 23 percent higher at N$340msup2. This was evident in the central property market, where 12 stands were mortgaged at an average price of N$640msup2 and thus representing a 53 percent year on year increase in land prices in the central area.

Coastal land prices were a lot more affordable at N$144msup2 along with a 15 percent year on year price increase. Northern land prices contracted by 53 percent year on year to N$152msup2, due to increased land delivery and encouraging developer activity. A further 393 800msup2 of land was mortgaged by developers, with a maximum potential for 920 free standing homes.”

In conclusion Kalili said: “House prices continued to increase while volumes continued to decline. Municipal construction data continued to disappoint particularly with regard to new houses completed.

This persistent supply shortage is pushing up local property prices to the second highest price increases in the world. Further supply weakness is expected as the coastal market moves into its seasonal dip.

However, developer activity was encouraging during June and hopefully this will translate into increased land delivery in the medium term.

But for now, the market remains grossly under-supplied and therefore house prices are expected to continue on the upward trajectory and end the year plusmn15 percent higher than the same period last year on the back of above average economic growth, robust consumer demand and ger mining exports to boost household incomes.”

Source : New Era