House prices fall incrementally

House prices fall incrementally0.8% decrease in prices House prices are expected to decelerate this year, according to FNB Namibia's latest Housing Price Index. Persistently weak economic growth, rising unemployment and weak household disposable income growth have begun to weaken property prices in Namibia.

House prices fell marginally by 0.8% and have been waning since December 2016.

This is according to the latest Housing Price Index (HPI) released by FNB Namibia yesterday.

“For the month of April, the average annual rate of growth has fallen to 7.0% in nominal terms, despite the very strong price growth in the coastal and southern regions. When adjusted for inflation and according to new methodologies, the real house prices fell marginally by 0.8% and have been negative month to month since December 2016,” said Josephat Nambashu, market research analyst at FNB Namibia.

Evidently, the search for secure neighbourhoods with adequate amenities influenced significantly the price dynamics in the capital. High-income suburbs such as Klein Windhoek, Academia and Olympia are currently enduring negative price growth, while Auasblick, Eros, Finckenstein and Kleine Kuppe are enjoying abnormally high price appreciation. This divergent trend is typical of a market in transition, Nambashu explained.

Property prices in the high-income suburbs were expected to trend downwards while middle-income areas were expected to show more consistency, said Nambashu.

“Given the negative economic data, we do expect the high-income suburbs to trend downwards with more consistency. The middle-income suburbs are a bit more consistent, with prices increasing in the double-digit range, with the exception of Academia (-21.6%) and Hochland Park (5.7%). The decline in Academia is ascribed to the land that was auctioned in 2014 and as such should not be mistaken for weakening underlying fundamentals.”

On the other side of the spectrum, Nambashu found that lower-income buyers displayed divergent trends in their appetite for property.

“Low-income suburbs showed very divergent trends as well, with prices increasing by as much as 24.1% in Okuryangava, while falling by as much as 4.5% in Wanaheda. During economic downturns, we generally see property prices in the lower-income segments strengthening as households downsize, resulting in higher demand for low-income suburbs,” said Nambashu.

“For April, housing volumes were down by 6.9%, and although recovering from the November low, the rising unemployment along with disposable income pressures do not give us much comfort in continued recovery. Our Estate Agent Survey suggests that trading activity across the market is deteriorating and that properties are spending as much as 25 weeks on the market and particularly in the high-income space.

“With residential construction activity expected to remain subdued, transactions may deteriorate even further, while properties spend even longer on the market before being sold. We do, however, expect volumes to grow from strength to strength in the northern property market, but this will certainly not be sufficient to stop the decline from the rest of the market.”

According to Nambashu, the outlook for house prices is expected to decelerate for the rest of 2017.

“In conclusion, we wish to state that, after averaging 10% increase during the 2016 year, we expect growth to decelerate for the remainder of 2017. This view is supported by the weak economic data and the persistently low volume data in the housing market and therefore we expect the HPI to average 6.2% this year,” he concluded.

STAFF REPORTER