Property prices may remain depressed- FNB
By Business Reporter
THE continued contraction in housing prices is not a surprising outcome given the severely depressed economic environment, FNB Namibia’s Ruusa Nandago, Market Research Manager has said in the latest FNB Residential Property Report of June 2019.
“Our view is therefore that the risk of further declines in house prices remains elevated, as risks to the macroeconomic outlook remain on the downside and disposable income growth comes under pressure. While the rate of uptake in mortgage credit is still positive – recorded at 7.6% y/y at the end of June – we have noted that the overall trend in mortgage credit extension has been slowing. With consumer demand waning, we do not expect that the recently announced repo rate cut and the change in LTV regulations will turn the property market around,” Nandago said.
FNB maintains the view that a significant overall improvement in the property market will largely depend on higher disposable incomes through increases in real wages.
“We do not see the situation in the property market improving given the depressed economic environment, the precarious unemployment situation and anemic consumer spending. We therefore expect the housing market to remain in the red, with any improvements are likely to be slow and gradual. We are of the view that a turnaround in the economy that will bolster real wage growth and consumer spending is the vital catalyst that is will place growth in the property market on a stronger footing,” added Nandago.
The FNB House Price Index contracted by 3.7% y/y at the end of June 2019 compared to a contraction of 2.0% over the same period last year.
Central property prices showed a contraction of 6.1% y/y at the end of June 2019 compared to a growth of 0.3% y/y observed over the same period last year. This contraction brings the average house price down to N$1.4 million compared to N$1.5 million recorded over the same period last year. The negative growth was driven by slowdowns across all segments. The small, medium and luxury segments of 1.9% y/y, 0.1% y/y and 27.0% y/y. Furthermore, growth in the large segment slowed down significantly to 4.9% y/y.
The Coastal region is the weakest performer with property prices showing a deeper contraction of 11.4% compared to a contraction of 2.6% over the same period last year. While the small, medium and large segments record growth of 2.3% y/y, 0.7% y/y and 4.8% y/y respectively, this was counteracted by the lack of activity in the luxury segment in which no transactions have taken place since November 2017. Henties Bay recorded the biggest price contraction of 37.5%, followed by Swakopmund which recorded a contraction of 15.8% and Walvis Bay which recorded a contraction of 14.8%. The average house price in the Coastal region has consequently come down to N$1 025 000 compared to N$1 157 000 recorded in June 2018.
Northern property prices have also continued to retreat, contracting by 6.5% y/y, compared to a growth of 5.3% recorded over the same period in 2018. This contraction is driven by price contractions in the small segment of 1.9%, which offset growth in the medium and large segments of 3.0% y/y and 9.8% y/y. The average house price in the Northern region is now N$822 000, the lowest it has been this year. The average house price over the same period last year was recorded at N$879 000.
The price index for the Southern region showed the smallest contraction of 5.1% y/y compared to growth of 2.2% recorded over the same period last year. The average house price in the Southern region is now N$832 000 compared to N$877 000 recorded in June 2018 with this decline driven solely by a contraction in the small housing segment.