Supply of land puts pressure on house prices

A serviced plot in Keetmanshoop costs about N$20 000, while the same size erf in Khomasdal costs N$225 000.

15 June 2021 | Infrastructure

ELLANIE SMIT

WINDHOEK

The rising supply deficit in land servicing and delivery continues to put pressure on house prices.

It costs about N$593 897 to build a three-bedroom house in Windhoek, compared to N$388 003 for the same house at Keetmanshoop, due to varying land prices.

A plot measuring 375 square metres in Windhoek’s Khomasdal suburb, which is considered a middle-income area, costs 11 times more than the same size plot in Keetmanshoop’s middle-income residential area.

Taking into consideration all costs involved in the house construction value chain, land accounts for 5% of total cost in Keetmanshoop while in Windhoek it accounts for 38%.

This is according to the latest report by First Capital, which monitors housing trends in Namibia.

It compared construction costs in Windhoek, Keetmanshoop, Swakopmund, Ondangwa, Rundu and Katima Mulilo in March this year.

Building materials

The report found that the cost of building a standard three-bedroom house is around N$449 659 in Swakopmund, and around N$399 895 in towns such as Rundu, Ondangwa and Katima Mulilo.

Building materials remain the most significant cost component in the house construction value chain, on average accounting for more than 60% of the total cost for building a new house.

“The cost of building materials remains higher in northern parts of the country relative to central and southern parts,” according to the report.

On average the building materials needed for a standard three-bedroom house cost N$254 302 in Katima Mulilo, Ondangwa and Rundu while the same materials averaged N$252 692 in Keetmanshoop, Windhoek and Swakopmund.

“The differences in building materials cost by town reflects varying prices due to supply sources that are largely unique to every town.”

Exorbitant

The cost of a serviced plot measuring 375 square metres is the cheapest in Keetmanshoop at N$19 922, followed by Rundu at N$29 574.

The same size of land would cost N$225 396 in a middle-class area such as Khomasdal in Windhoek, making it the most expensive, followed by Swakopmund at N$80 878.

“Though average growth of land prices has declined from the five-year average of 9% to 6% year-to-date, land still remains exorbitantly elevated, especially in Windhoek and coastal towns. High prices of land in Windhoek and coastal towns can be explained by the higher demand as opposed to the supply of land in these towns.”

The report says that other than land being costly in these towns, the rising supply deficit in land servicing and delivery continues to put pressure on prices.

“However, this research concludes that other than the mismatch between demand and supply of land, inefficiencies in servicing of land as well as speculative motives among private developers equally contributes to high urban land prices.”

Land prices are expected to remain persistently high, which continues to be a limiting factor in acquiring residential properties, especially in the central and coastal parts of the country.

The report added that relative to previous years budgetary allocations for land servicing and housing remain low.

It said the scope for increasing public spending on housing remains limited, partly due to pressure to increase social spending and rein in the spending ceiling.

“This is expected to undermine the effort to deliver on housing and urban land. Given the high housing backlog currently estimated at 300 000, the housing budgetary allocations remain low although useful to make a notable dent in the housing market but its impact could be undermined by low private sector investment appetite to develop informal settlements.”

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