House purchases remain muted
Average price of a house now N$1.2 million across the country
With rising default rates, FNB Namibia says it expects buying activity for houses to remain constrained over the remainder of 2024 and the first half of 2025.
The FNB House Price Index printed a 12-month average growth of 1.5% at the end of the fourth quarter of 2023, compared to a growth of 3.3% at the end of the third quarter of 2023 and -1.9% at the end of the fourth quarter of 2022. The growth rates for the small, medium, large and luxury segments stood at 0.7%, -1.4%, 7.3% and 24.9%, respectively. From a regional perspective, the coastal region once again recorded the strongest growth of 8.8%, while the central, northern and southern regions recorded growth rates of -2.5%, -0.2% and 6.1%, respectively, according to FNB Namibia group economist Ruusa Nandago.
The overall national house price now stands at N$1 214 674 during the fourth quarter of 2023, slightly lower than N$1 218 086 in the third quarter of 2023 but higher than N$1 196 569 over the corresponding period in 2022. The average prices for the central, coastal, northern and southern regions stand at N$1 550 000, N$1 398 000, N$864 000 and N$881 000, respectively. Transaction volumes remain contractionary for the sixth consecutive quarter, at a 12-month average growth of -19.1% at the end of the fourth quarter of 2023, up from –27.7% in the third quarter of 2023 and -17.9% in the fourth quarter of 2022. The contraction in volumes was once again broad-based across all four regions.
Subdued
From a segment perspective, the contraction was observed in the small (-29.5%) and medium (-31.3%) segments, while the large and luxury segments recorded a 20.0% and 0.0% growth rate, respectively. This signals that buying activity in the residential property market remains broadly subdued across the board.
The subdued buying activity is aligned with the elevated interest rate and inflation environment, which have weighed on consumer health in the context of high levels of indebtedness among households, which currently stand at 86%.
This limits the ability for consumers to spend on assets such as housing as the focus is on supplementing disposable income, which has come under pressure in the prevailing environment.
This view is corroborated by private sector credit extension numbers, which show that household mortgage credit grew by 3.0% on a 12-month rolling average basis in the fourth quarter of 2023 compared to unsecured credit, which grew by 11.1% over the same period.
"We maintain our view that inflation will moderate but remain sticky, that the repo rate has peaked at 7.75%, and the cutting cycle will commence in the latter half of 2024. With rising default rates observed, we continue to expect buying activity to remain constrained over the remainder of 2024 and the first half of 2025, as the cutting cycle will be too shallow to induce a significant rebound in the residential property market," Nandago said.
Along with recent loan-to-value regulation adjustments, FNB Namibia noted that the allocation of N$700 million for the upgrading of informal settlements, land servicing and provision for housing was allocated in the Fiscal Year 2024–25 budget. "Furthermore, the brackets for transfer and stamp duties have been adjusted for inflation, and the exemption level has been increased from N$600 000 to N$1 100 000 to improve access to housing," Nandago said.
The overall national house price now stands at N$1 214 674 during the fourth quarter of 2023, slightly lower than N$1 218 086 in the third quarter of 2023 but higher than N$1 196 569 over the corresponding period in 2022. The average prices for the central, coastal, northern and southern regions stand at N$1 550 000, N$1 398 000, N$864 000 and N$881 000, respectively. Transaction volumes remain contractionary for the sixth consecutive quarter, at a 12-month average growth of -19.1% at the end of the fourth quarter of 2023, up from –27.7% in the third quarter of 2023 and -17.9% in the fourth quarter of 2022. The contraction in volumes was once again broad-based across all four regions.
Subdued
From a segment perspective, the contraction was observed in the small (-29.5%) and medium (-31.3%) segments, while the large and luxury segments recorded a 20.0% and 0.0% growth rate, respectively. This signals that buying activity in the residential property market remains broadly subdued across the board.
The subdued buying activity is aligned with the elevated interest rate and inflation environment, which have weighed on consumer health in the context of high levels of indebtedness among households, which currently stand at 86%.
This limits the ability for consumers to spend on assets such as housing as the focus is on supplementing disposable income, which has come under pressure in the prevailing environment.
This view is corroborated by private sector credit extension numbers, which show that household mortgage credit grew by 3.0% on a 12-month rolling average basis in the fourth quarter of 2023 compared to unsecured credit, which grew by 11.1% over the same period.
"We maintain our view that inflation will moderate but remain sticky, that the repo rate has peaked at 7.75%, and the cutting cycle will commence in the latter half of 2024. With rising default rates observed, we continue to expect buying activity to remain constrained over the remainder of 2024 and the first half of 2025, as the cutting cycle will be too shallow to induce a significant rebound in the residential property market," Nandago said.
Along with recent loan-to-value regulation adjustments, FNB Namibia noted that the allocation of N$700 million for the upgrading of informal settlements, land servicing and provision for housing was allocated in the Fiscal Year 2024–25 budget. "Furthermore, the brackets for transfer and stamp duties have been adjusted for inflation, and the exemption level has been increased from N$600 000 to N$1 100 000 to improve access to housing," Nandago said.
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