Longing for a home run
Affordability remains key
The majority of individuals in the Namibian House remain without a decent and affordable house of their own, due a myriad of challenges.
The value of assets repossessed by commercial banks in Namibia have skyrocketed from about N$4.9 million in July 2017 to around N$207 million in March this year – a staggering increase of more than 4 000%.
This figure is contained in a property market overview, released by Simonis Storm (SS).
The period under review is characterised by very low or negative economic growth, as well as recovery from a low base following the Covid-19 pandemic. In addition, the Bank of Namibia (BoN) has been on an aggressive repo rate hike: from 3.75% in 2020 to 7.75% currently.
As a result, the prime lending rate in the country has catapulted from 7.5% in 2022 to 11.5% at the moment.
Analysing the data
According to SS, both residential and commercial properties typically accounted for 74% of total assets - e.g. vehicles, equipment, property, etc. - that were repossessed by banks and that have not been sold yet.
Analysing the mortgage data in Namibia, SS has observed that the proportion of residential mortgages categorised as "doubtful" and "loss" by commercial banks has risen from 1.3% of the total residential mortgages in 2014 to 5.0% by March 2023.
In the case of commercial mortgages, the combined percentage of mortgages categorised as "doubtful" and "loss" experienced an increase from 0.3% in 2014 to 4.4% by March 2023.
“What is reassuring is that about 95% of all mortgages is classified as ‘acceptable’,” SS said.
Out of the entire outstanding amount for overdue mortgages held by all commercial banks, approximately 44% of mortgage payments are late by a period of 1 to 2 months, while roughly 27% are overdue by 12 months or even more.
“Using data from Bank of Namibia, we calculate that 15% of all mortgages have overdue payments,” SS added.
Considering all of the information mentioned above, the various indicators such as property repossessions, mortgages categorised as "doubtful," and the count of overdue mortgages, have shown a decline in performance over recent years, SS said.
This trend could potentially persist, especially considering the recent cycle of interest rate increases, they added. Nevertheless, based on the current set of indicators, it would not be deemed that there has been a significant occurrence of high-risk behaviour associated with mortgages in Namibia, SS said.
House prices
According to SS, house prices, on average, have surged by 1 258% from January 1990 to March 2023. This means that average house prices in Namibia are currently 13 times the average house price 33 years ago.
“This implies that today’s young individual (those aged between 18 and 35), who have an estimated unemployment rate of close to 60%, will be paying 13 times the price their parents paid for their house and might therefore not be able to afford housing for themselves,” SS said.
Because of the absence of salary data, SS could not ascertain whether the average salary has maintained a suitable pace of growth relative to both inflation affecting disposable income and the escalation in house prices.
“However, conversations with some of our stakeholders seem to indicate that the average salary for Namibians has largely not kept pace with the rise in living costs, hence inequality remains high,” the analysts said.
From 1990 to 2000, the average house prices saw a yearly growth of 8%. This average annual increment then elevated to 10% during the period from 2000 to 2010, and notably surged to 15% between 2010 and 2015. Subsequently, starting from 2015 until 2023, the average annual increase in house prices has been a 2%, according to the SS report.
Although SS’ econometric model detects a house price bubble between 2010 and 2016, the analysts believe that instead of a bubble, fundamental factors such as demand and supply being out of whack, together with behavioural or psychological factors such as some exploiting the situation and property speculation all led to a surge in house prices and prices reached a new norm given that the underlying cause has not changed - i.e. serviced land still remains under-supplied).
Areas
The central area of Namibia experienced the fastest growth in average house prices, followed by the coastal, northern and southern areas, SS noted.
The difference in house prices between the coastal and central regions has become smaller in recent months, reversing a trend of widening that occurred between 2016 and 2022, they added.
Based on the most recent data from the first quarter of 2023, the highest average house prices are found in the coastal area, where the average house price has reached N$1.6 million.
Following closely is the central area with an average of N$1.5 million, followed by the North at N$869 000 and the South at N$795 000.
The South
According to SS, the southern property market should be most interesting to analyse going forward, given the planned green hydrogen, as well as the oil and gas projects between Lüderitz and Oranjemund.
“When engaging with town councils, real estate agents and stakeholders, we understand that house prices have quadrupled in the last 12 months in these towns, due to housing shortages and increased demand for housing at the same time.
“We know of a case where a house was valued at N$350 000, but sold for N$1.4 million in Lüderitz. Similarly, a house valued at N$400 000 sold for N$1.2 million in Oranjemund,” SS said.
Lüderitz benefits from various additional economic activities that contribute to its housing requirements. These activities encompass salmon farming, kelp production, the revival of fishing operations, wind power installations and tourism, among others.
Due to Namdeb's adoption of a new mining methodology, there is a demand for additional workers, prompting the need for expanded housing facilities in Oranjemund.
“These developments can explain why the southern area has overtaken the northern area in average house prices in recent years. Add green hydrogen, oil and gas operations to these towns, and the need for housing increases further and so too the potential for house price increases if town councils in these towns do not increase the supply of serviced erven or plots,” SS said.
Volumes
The trading activity within the property market, measured by the count of house purchase transactions documented by the Deeds Office, exhibits significant volatility, according to SS.
This activity had an average of 165 transactions per month during the period from 1990 to 2000. This average then rose to 243 transactions per month from 2000 to 2010 and further increased to 303 monthly transactions between 2010 and 2023.
Around the time of Independence, the majority of housing transactions were concentrated in the central part of Namibia. However, the proportion of all housing transactions occurring in this area has consistently decreased since that period.
Over the past few years, the northern area has experienced the most rapid growth in housing transactions, whereas transactions in the central and coastal regions have decreased. Housing transactions in the southern area, on the other hand, have remained relatively stable.
“Going forward, we expect the central, coast and southern areas to increase their share of total housing transactions,” SS said.
Based on data by FNB Namibia from the Deeds Office, the sale of new plots or erven has displayed substantial fluctuations since 2010, which marks the beginning of the data series.
During the period of rising house prices between 2010 and 2017, an average of 65 plots were sold each month. This monthly average increased to 106 after 2017, coinciding with a stabilisation of house prices.
According to SS, the relationship between plot sales and house prices exhibited a largely positive correlation until 2018, indicating that plot sales and house prices moved in the same direction. However, this correlation shifted to a predominantly negative one in subsequent years, meaning that house prices decreased as plot sales increased.
‘No brainer’
“It is therefore a no brainer, if our government wants the average citizen to better afford a house to build a decent life for themselves, it is critical to allow private investment in supplying serviced plots if it – and the responsible ministry [rural and urban development] – cannot prioritise this in its budget allocations.
“Increasing the supply of serviced plots is the quickest solution to addressing housing affordability in Namibia,” SS said.
Affordability remains a significant issue, with a majority of young individuals unable to afford property due to financial constraints. This challenge is exacerbated by pronounced income and asset inequalities in Namibia, leading to a scenario where renting is more prevalent than property ownership, SS said.
“Given high income inequality and high asset inequality in Namibia, we are still a nation characterised as being mostly renters and not property owners. Simply put, we need the supply of housing to increase and thereby reduce inflationary pressure on property prices if we are to improve general affordability of housing in Namibia,” the analysts said.
The government set a target to provide 20 000 housing units by the conclusion of 2025. However, achieving this goal appears improbable based on the present rate of construction by the National Housing Enterprise (NHE), according to SS. Furthermore, as indicated on the Harambee Prosperity Plan website, with just two years left until the deadline, only 29% of this target has been realised.
“Owning a house is more than simply being the owner of an asset, a house provides security, a place for family, human dignity and a space filled with memories, emotions and interactions.
“Addressing the housing shortage should therefore be part of government’s top priorities in terms of its budget allocations and political agenda,” SS said.
This figure is contained in a property market overview, released by Simonis Storm (SS).
The period under review is characterised by very low or negative economic growth, as well as recovery from a low base following the Covid-19 pandemic. In addition, the Bank of Namibia (BoN) has been on an aggressive repo rate hike: from 3.75% in 2020 to 7.75% currently.
As a result, the prime lending rate in the country has catapulted from 7.5% in 2022 to 11.5% at the moment.
Analysing the data
According to SS, both residential and commercial properties typically accounted for 74% of total assets - e.g. vehicles, equipment, property, etc. - that were repossessed by banks and that have not been sold yet.
Analysing the mortgage data in Namibia, SS has observed that the proportion of residential mortgages categorised as "doubtful" and "loss" by commercial banks has risen from 1.3% of the total residential mortgages in 2014 to 5.0% by March 2023.
In the case of commercial mortgages, the combined percentage of mortgages categorised as "doubtful" and "loss" experienced an increase from 0.3% in 2014 to 4.4% by March 2023.
“What is reassuring is that about 95% of all mortgages is classified as ‘acceptable’,” SS said.
Out of the entire outstanding amount for overdue mortgages held by all commercial banks, approximately 44% of mortgage payments are late by a period of 1 to 2 months, while roughly 27% are overdue by 12 months or even more.
“Using data from Bank of Namibia, we calculate that 15% of all mortgages have overdue payments,” SS added.
Considering all of the information mentioned above, the various indicators such as property repossessions, mortgages categorised as "doubtful," and the count of overdue mortgages, have shown a decline in performance over recent years, SS said.
This trend could potentially persist, especially considering the recent cycle of interest rate increases, they added. Nevertheless, based on the current set of indicators, it would not be deemed that there has been a significant occurrence of high-risk behaviour associated with mortgages in Namibia, SS said.
House prices
According to SS, house prices, on average, have surged by 1 258% from January 1990 to March 2023. This means that average house prices in Namibia are currently 13 times the average house price 33 years ago.
“This implies that today’s young individual (those aged between 18 and 35), who have an estimated unemployment rate of close to 60%, will be paying 13 times the price their parents paid for their house and might therefore not be able to afford housing for themselves,” SS said.
Because of the absence of salary data, SS could not ascertain whether the average salary has maintained a suitable pace of growth relative to both inflation affecting disposable income and the escalation in house prices.
“However, conversations with some of our stakeholders seem to indicate that the average salary for Namibians has largely not kept pace with the rise in living costs, hence inequality remains high,” the analysts said.
From 1990 to 2000, the average house prices saw a yearly growth of 8%. This average annual increment then elevated to 10% during the period from 2000 to 2010, and notably surged to 15% between 2010 and 2015. Subsequently, starting from 2015 until 2023, the average annual increase in house prices has been a 2%, according to the SS report.
Although SS’ econometric model detects a house price bubble between 2010 and 2016, the analysts believe that instead of a bubble, fundamental factors such as demand and supply being out of whack, together with behavioural or psychological factors such as some exploiting the situation and property speculation all led to a surge in house prices and prices reached a new norm given that the underlying cause has not changed - i.e. serviced land still remains under-supplied).
Areas
The central area of Namibia experienced the fastest growth in average house prices, followed by the coastal, northern and southern areas, SS noted.
The difference in house prices between the coastal and central regions has become smaller in recent months, reversing a trend of widening that occurred between 2016 and 2022, they added.
Based on the most recent data from the first quarter of 2023, the highest average house prices are found in the coastal area, where the average house price has reached N$1.6 million.
Following closely is the central area with an average of N$1.5 million, followed by the North at N$869 000 and the South at N$795 000.
The South
According to SS, the southern property market should be most interesting to analyse going forward, given the planned green hydrogen, as well as the oil and gas projects between Lüderitz and Oranjemund.
“When engaging with town councils, real estate agents and stakeholders, we understand that house prices have quadrupled in the last 12 months in these towns, due to housing shortages and increased demand for housing at the same time.
“We know of a case where a house was valued at N$350 000, but sold for N$1.4 million in Lüderitz. Similarly, a house valued at N$400 000 sold for N$1.2 million in Oranjemund,” SS said.
Lüderitz benefits from various additional economic activities that contribute to its housing requirements. These activities encompass salmon farming, kelp production, the revival of fishing operations, wind power installations and tourism, among others.
Due to Namdeb's adoption of a new mining methodology, there is a demand for additional workers, prompting the need for expanded housing facilities in Oranjemund.
“These developments can explain why the southern area has overtaken the northern area in average house prices in recent years. Add green hydrogen, oil and gas operations to these towns, and the need for housing increases further and so too the potential for house price increases if town councils in these towns do not increase the supply of serviced erven or plots,” SS said.
Volumes
The trading activity within the property market, measured by the count of house purchase transactions documented by the Deeds Office, exhibits significant volatility, according to SS.
This activity had an average of 165 transactions per month during the period from 1990 to 2000. This average then rose to 243 transactions per month from 2000 to 2010 and further increased to 303 monthly transactions between 2010 and 2023.
Around the time of Independence, the majority of housing transactions were concentrated in the central part of Namibia. However, the proportion of all housing transactions occurring in this area has consistently decreased since that period.
Over the past few years, the northern area has experienced the most rapid growth in housing transactions, whereas transactions in the central and coastal regions have decreased. Housing transactions in the southern area, on the other hand, have remained relatively stable.
“Going forward, we expect the central, coast and southern areas to increase their share of total housing transactions,” SS said.
Based on data by FNB Namibia from the Deeds Office, the sale of new plots or erven has displayed substantial fluctuations since 2010, which marks the beginning of the data series.
During the period of rising house prices between 2010 and 2017, an average of 65 plots were sold each month. This monthly average increased to 106 after 2017, coinciding with a stabilisation of house prices.
According to SS, the relationship between plot sales and house prices exhibited a largely positive correlation until 2018, indicating that plot sales and house prices moved in the same direction. However, this correlation shifted to a predominantly negative one in subsequent years, meaning that house prices decreased as plot sales increased.
‘No brainer’
“It is therefore a no brainer, if our government wants the average citizen to better afford a house to build a decent life for themselves, it is critical to allow private investment in supplying serviced plots if it – and the responsible ministry [rural and urban development] – cannot prioritise this in its budget allocations.
“Increasing the supply of serviced plots is the quickest solution to addressing housing affordability in Namibia,” SS said.
Affordability remains a significant issue, with a majority of young individuals unable to afford property due to financial constraints. This challenge is exacerbated by pronounced income and asset inequalities in Namibia, leading to a scenario where renting is more prevalent than property ownership, SS said.
“Given high income inequality and high asset inequality in Namibia, we are still a nation characterised as being mostly renters and not property owners. Simply put, we need the supply of housing to increase and thereby reduce inflationary pressure on property prices if we are to improve general affordability of housing in Namibia,” the analysts said.
The government set a target to provide 20 000 housing units by the conclusion of 2025. However, achieving this goal appears improbable based on the present rate of construction by the National Housing Enterprise (NHE), according to SS. Furthermore, as indicated on the Harambee Prosperity Plan website, with just two years left until the deadline, only 29% of this target has been realised.
“Owning a house is more than simply being the owner of an asset, a house provides security, a place for family, human dignity and a space filled with memories, emotions and interactions.
“Addressing the housing shortage should therefore be part of government’s top priorities in terms of its budget allocations and political agenda,” SS said.
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