Coastal house prices drop lower

Jessica (Erongo) Botes
The coastal property prices fell for the ninth month in a row, this time by 38% year-on-year (y/y).

According to Josephat Nambashu, analyst at FNB Namibia, sales are increasingly concentrated in the lower segments (84% of total volumes), bringing the overall average price down. Consistent with this development, property prices fell by 33,4% y/y in Swakopmund and by 40,3% y/y in Walvis Bay.

“Given the strong mass housing and aggressive land delivery at the coast, price weakness has begun to trickle down to the middle and lower property­ prices segments, where 13,8% y/y and 14,8% y/y contractions were recorded respectively. Additionally, volumes shot up by 44,2% through March, with most of the supply coming through the middle and lower price segments,” said Nambashu.

Demand in the upper and luxury segments has stagnated under the current economic backdrop. FNB's Estate Agent Survey reported properties spending about 24 weeks on the market at the coast whilst the agents' affordability perception index ticked up, in that income levels are far behind house price levels.



Sixth contraction

Nationally, house prices contracted for a third straight month in March by 8,8% y/y, the sixth contraction in the last seven months.

“The decline meant the price of the average home was cut by N$109 941 from what it was this time last year to N$1 136 030,” said Nambashu.

When disaggregated, property prices­ in the middle price segment stag­nated, while property prices in the upper price segment contracted by 3% y/y. Conversely, property prices in the lower price segment increased modest­ly by 3,4% y/y. Additionally, year to date data shows property prices­ across 14 towns, including the capital Windhoek, contracted. Volumes­ however increased 11,7%, driven primarily by the new affordable housing supply and improved land delivery. Volumes in the lower price segment have consequently risen by 17,9%, while land delivery has increased by 58%, bringing partial relief to those in the housing backlog. Both the middle and upper price segment recorded volume increases as well, albeit minimal. However, transactions in the luxury housing segment have dried up, with only one transaction registered in the past four months.

“Given the likelihood of more affordable housing stock entering the market and the delayed reaction to the economic downturn, we expect property prices to retreat even further­ and remain under pressure for longer, allowing the market to correct after decades of exuberant house price inflation. Sellers seem to remain in denial on pricing shifts, as 91% of homes sold in the period, sold for below asking price, which points to overly optimistic prices in an ultra-cautious buyers' market.”

“House price growth has diminished, and the recent developments suggest that we are set to face price correction as affordable property supply increases at a time where subdued economic activity persists and labour uncertainty is high. These factors have curtailed housing demand, and with mortgage advances growing at a paltry 8,1%, property prices can only contract,” said Nambashu.

According to him economically nothing looks very strong, just mildly better.

“As such, house prices are expected to contract even further through 2018. Current forecast points towards price contractions of 5,8% for 2018 as a whole, easing to 1,2% in 2019.”