Property market: ‘Buyers in driving seat’
FNB Namibia expects house prices to shed 5.8% of their value in 2018, and to start seeing some price resistance in 2019.
The housing market is expected to become oversupplied with properties, providing various purchase opportunities for first-time property owners, the group economist of FNB Namibia, Namene Kalili, says.
“With economic growth stagnating, consumer confidence waning, rising interest rates, rising home ownership costs and the economy still shedding jobs, the stage is set for lower housing demand, at a time when land delivery and housing supply is on the increase,” Kalili says in the latest FNB House Price Index, based on August data.
“Under these conditions, the few buyers that are available will be in the driving seat, dictating terms, and resulting in further price corrections,” Kalili says.
FNB Namibia expects 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 more buyers.
“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,” Kalili says.
The latest data shows that the residential property market remained in the red through August, as property prices contracted by 2.9%.
“This means that property prices have contracted in seven of the first eight months of 2018,” according to Kalili.
The average property price has now moderated N$1.177 million, from its March 2017 peak of N$1.246 million. Regionally, property prices are falling across the central and coastal regions, with 6.0% and 5.0% price contractions respectively.
“The price declines remain concentrated in the luxury segment, where prices have plummeted by 29.4% over the past year, which is trickling down into the lower to upper price segments in the form of decelerated price increases,” Kalili says.
Volumes, advances
Volumes have picked up 27.8% year on year, to levels last seen in 2013, he says.
“This comes off rather robust volume growth in the lower and middle price segments, as local authorities ramp up affordable housing supply in the northern property market, whilst the incidence of distressed sales accelerates in the central market.”
Despite the robust volume growth, normalised mortgage advances are down 3.7%, Kalili says.
“This is due to a N$200 million mortgage advance contraction in the luxury segment, on the back of price and volume contraction. Additionally, mortgage advances to the middle and upper price segments are also contracting, due to volume contraction only.
“Therefore, the mortgage cake is becoming smaller for the increasing number of mortgage financiers, which translates into more competition, which translates into better terms for consumers,” Kalili says.
Land delivery
Land delivery accelerated even further to 138 stands delivered nationwide.
“This has bought the cumulative land delivery 957 stands for the first eight months of 2018, and already the second highest land delivery rate on record,” Kalili says.
Further analysis shows that it is the northern and coastal property markets that continue to push land delivery higher. However, the central property market has recently begun to accelerate land delivery.
“More land will hopefully translate into better land prices in the medium term,” Kalili says.
“But for now, land prices continued to increase, with the August print 43.1% higher than a year ago. This has pushed the average cost of land to N$886/m², symptomatic of the pervasive housing shortage,” he says.
“With economic growth stagnating, consumer confidence waning, rising interest rates, rising home ownership costs and the economy still shedding jobs, the stage is set for lower housing demand, at a time when land delivery and housing supply is on the increase,” Kalili says in the latest FNB House Price Index, based on August data.
“Under these conditions, the few buyers that are available will be in the driving seat, dictating terms, and resulting in further price corrections,” Kalili says.
FNB Namibia expects 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 more buyers.
“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,” Kalili says.
The latest data shows that the residential property market remained in the red through August, as property prices contracted by 2.9%.
“This means that property prices have contracted in seven of the first eight months of 2018,” according to Kalili.
The average property price has now moderated N$1.177 million, from its March 2017 peak of N$1.246 million. Regionally, property prices are falling across the central and coastal regions, with 6.0% and 5.0% price contractions respectively.
“The price declines remain concentrated in the luxury segment, where prices have plummeted by 29.4% over the past year, which is trickling down into the lower to upper price segments in the form of decelerated price increases,” Kalili says.
Volumes, advances
Volumes have picked up 27.8% year on year, to levels last seen in 2013, he says.
“This comes off rather robust volume growth in the lower and middle price segments, as local authorities ramp up affordable housing supply in the northern property market, whilst the incidence of distressed sales accelerates in the central market.”
Despite the robust volume growth, normalised mortgage advances are down 3.7%, Kalili says.
“This is due to a N$200 million mortgage advance contraction in the luxury segment, on the back of price and volume contraction. Additionally, mortgage advances to the middle and upper price segments are also contracting, due to volume contraction only.
“Therefore, the mortgage cake is becoming smaller for the increasing number of mortgage financiers, which translates into more competition, which translates into better terms for consumers,” Kalili says.
Land delivery
Land delivery accelerated even further to 138 stands delivered nationwide.
“This has bought the cumulative land delivery 957 stands for the first eight months of 2018, and already the second highest land delivery rate on record,” Kalili says.
Further analysis shows that it is the northern and coastal property markets that continue to push land delivery higher. However, the central property market has recently begun to accelerate land delivery.
“More land will hopefully translate into better land prices in the medium term,” Kalili says.
“But for now, land prices continued to increase, with the August print 43.1% higher than a year ago. This has pushed the average cost of land to N$886/m², symptomatic of the pervasive housing shortage,” he says.
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