FNB house price index growth decelerates
As interest rates march higher
The twelve-month national weighted average house price came in at N$1 205 111 at the end of March 2022, up from N$1 157 689 in the corresponding period of 2021.
Price dynamics in the Namibian housing market appear to be trending towards pre-Covid-19 levels. However, the incoming data on residential mortgage deals remains relatively strong compared to a more conservative view of “mean reversion”, which would imply a much flatter performance.
Overall, the FNB residential property price index posted a twelve-month average growth of 4.7% at the end of March 2022, down from 7.1% at the end of 2021, but unchanged compared to the same period over 2021. This was unsurprising, nonetheless, as the market is coming-off from an unsustainable high demand position - sparked by an inimitable and yet short-lived low interest rate environment. Therefore, the ongoing aggressive hiking of interest rates at a time when inflation is at elevated levels bode ill for credit appetite. This is creating a hasty slowdown in the demand for mortgage loans and homeownership in general. In effect, the volume index growth dropped drastically on a twelve-month rolling basis to -1.7% at the end of March 2022 from 16.4% seen over the corresponding period of 2021. As a result, the twelve-month national weighted average house price came in at N$1 205 111 at the end of March 2022, up from N$1 157 689 in the corresponding period of 2021.The relatively stronger market position despite deteriorating demand could be ascribed to a lagged transitory effect in the local economy. This lagged effect was more evident within the central region, which is understandable given its broader segments representation.
The central region has thus carried-through the housing market in the first quarter of 2022 - being the only region that has registered growth in house prices of 5.7% year-on-year to N$1 488 000. In contrast, the coastal, northern and southern regions disappointed on the downside, recording contractions in house prices of 4.8%, 10.9% and 14.7% year-on-year to N$1 122 000, N$823 000 and N$854 000 over the same period, respectively. This could imply a relatively high degree of market responsiveness to changes in demand dynamics in these regions.
Meanwhile, local economic pundits are also starting to see the story of “runaway” inflation and its impact on the investment landscape playing out in the Fixed Income space. For instance, the yield on a Namibian 10-year bond increased to 11.1% year-to-date (YTD) compared to 9.4% over the same period of 2021 as investors continue to factor in higher risk and benchmark movements. Effectively, the yield curve is starting to flatten in the belly and steepening at the short and longer-end. This suggest that inflation is here to stay for as long as oil prices remain high. Given this backdrop, retention of quality customers through offering competitive rates is thus likely to be one of the key strategic focus areas for most financial institutions to preserve their margins under a tough economic environment.
Central and Coast
The central house price index growth came in much stronger at 10.3% on a 12-month rolling basis leading to March 2022. This is the highest growth level seen since July 2016 and highlights the prevalence of a buoyant sales market particularly within the luxury housing segment. In effect, the luxury housing segment printed a 12-month average growth in house prices of 38.3% over the same period – a recurring theme since the beginning of 2021. As such, the 12-month average house price in Windhoek was recorded at N$1 1297 000, down by 1.7% quarter-on-quarter and up by 5.7% year-on-yyear. This points to a consistent increase in the formation of new homes in the upper market suburbs such as Academia, Cimbebacia, Eisenheim and Rocky Crest. Similarly, the most active suburbs in the lower end of the market are mainly Khomasdal, Otjomusie and Goreangab. Furthermore, Okahandja and Gobabis have also supported the growth momentum in the central region, with the 12-month average house prices recorded at N$939 000 and N$754 000 at the end of March 2022. This represents a year-on-year growth of 24.5% and 14.9%, respectively.
The coastal region experienced the greatest increase in its average property value over the last twelve months, with the latest index printing 14.2% at the end of March 2022 compared to 10.2% over the same period of 2021. Specifically, Swakopmund recorded a 12-month average house price of N$798 000 at the end of March 2022, up by 2.0% quarter-on-quarter and 21.6% year-on-year. This continues to highlight a relatively high dominance of the smaller and below-small housing market segments in Swakopmund, particularly in the area of Matutura. Most of the new homes were mainly delivered through the National Housing Enterprise – a commendable development given the affordability levels in this region. Moreover, Walvis Bay recorded a twelve-month average house price of N$960 000 at the end of March 2022, up by 0.2% quarter-on-quarter and 22.1% year-on-year. This is also expected as all bonds registered in Walvis Bay over the last 12 months fall in the smaller segment, and stretches across the areas of Kuisebmond, Narravile and Meersig. Lastly, Henties Bay witnessed a sprout in house price growth of 63.4% year-on-year to N$ 1 425 000 at the end of March 2022. This continues to paint the increasing relevance for holiday home market.
North and South
The northern house price index posted a twelve-month average contraction of 5.7% at the end of March 2021. This is the deepest contraction recorded since April 2014 and points the dominance of the small housing segment and a downward moderation in sales activity. The volume index is nonetheless starting to show firm signs of recovery from a negative growth territory seen in the last quarter, marking a twelve-month average growth of 0.0% at the end of March 2022. This reflects a considerable delivery of housing in Rundu, Oshakati, Grootfontein, Oshakati, Ondangwa, Outapi, Oshikuku, Omuthiya and Eehnana, to mention just a few. As the cost-of-living increases combined with constrained housing affordability in the central region, we view the semigration trends and considerations for quieter life to be driving demand for residential property in this region. Looking ahead, we expect demand to moderate as interest rates increase, but we don’t expect these dynamics to materially impact price developments in the region.
The southern house price index has performed poorly compared to the rest of the regions, posting a 12-month average contraction of 7.4% at the end of March 2022. The same trend was also observed in respect of the volume index, which recorded a contraction of 9.2% - the deepest contraction since May 2020. During the period under review, a sizeable share of sales activity was mainly observed in Keetmashoop and Mariental. The buyers’ profile is mainly characterized by joint bonds and to a certain extent by female individuals, implying that this market is perceived to be attractive to those that regard it as a primary place of residence and not necessary for investment such as the “buy-to-let” market. Furthermore, the average age for this market was calculated around 41 years old, further supporting the above narrative. Going forward, we maintain the same view as painted for the northern region.
Overall, the FNB residential property price index posted a twelve-month average growth of 4.7% at the end of March 2022, down from 7.1% at the end of 2021, but unchanged compared to the same period over 2021. This was unsurprising, nonetheless, as the market is coming-off from an unsustainable high demand position - sparked by an inimitable and yet short-lived low interest rate environment. Therefore, the ongoing aggressive hiking of interest rates at a time when inflation is at elevated levels bode ill for credit appetite. This is creating a hasty slowdown in the demand for mortgage loans and homeownership in general. In effect, the volume index growth dropped drastically on a twelve-month rolling basis to -1.7% at the end of March 2022 from 16.4% seen over the corresponding period of 2021. As a result, the twelve-month national weighted average house price came in at N$1 205 111 at the end of March 2022, up from N$1 157 689 in the corresponding period of 2021.The relatively stronger market position despite deteriorating demand could be ascribed to a lagged transitory effect in the local economy. This lagged effect was more evident within the central region, which is understandable given its broader segments representation.
The central region has thus carried-through the housing market in the first quarter of 2022 - being the only region that has registered growth in house prices of 5.7% year-on-year to N$1 488 000. In contrast, the coastal, northern and southern regions disappointed on the downside, recording contractions in house prices of 4.8%, 10.9% and 14.7% year-on-year to N$1 122 000, N$823 000 and N$854 000 over the same period, respectively. This could imply a relatively high degree of market responsiveness to changes in demand dynamics in these regions.
Meanwhile, local economic pundits are also starting to see the story of “runaway” inflation and its impact on the investment landscape playing out in the Fixed Income space. For instance, the yield on a Namibian 10-year bond increased to 11.1% year-to-date (YTD) compared to 9.4% over the same period of 2021 as investors continue to factor in higher risk and benchmark movements. Effectively, the yield curve is starting to flatten in the belly and steepening at the short and longer-end. This suggest that inflation is here to stay for as long as oil prices remain high. Given this backdrop, retention of quality customers through offering competitive rates is thus likely to be one of the key strategic focus areas for most financial institutions to preserve their margins under a tough economic environment.
Central and Coast
The central house price index growth came in much stronger at 10.3% on a 12-month rolling basis leading to March 2022. This is the highest growth level seen since July 2016 and highlights the prevalence of a buoyant sales market particularly within the luxury housing segment. In effect, the luxury housing segment printed a 12-month average growth in house prices of 38.3% over the same period – a recurring theme since the beginning of 2021. As such, the 12-month average house price in Windhoek was recorded at N$1 1297 000, down by 1.7% quarter-on-quarter and up by 5.7% year-on-yyear. This points to a consistent increase in the formation of new homes in the upper market suburbs such as Academia, Cimbebacia, Eisenheim and Rocky Crest. Similarly, the most active suburbs in the lower end of the market are mainly Khomasdal, Otjomusie and Goreangab. Furthermore, Okahandja and Gobabis have also supported the growth momentum in the central region, with the 12-month average house prices recorded at N$939 000 and N$754 000 at the end of March 2022. This represents a year-on-year growth of 24.5% and 14.9%, respectively.
The coastal region experienced the greatest increase in its average property value over the last twelve months, with the latest index printing 14.2% at the end of March 2022 compared to 10.2% over the same period of 2021. Specifically, Swakopmund recorded a 12-month average house price of N$798 000 at the end of March 2022, up by 2.0% quarter-on-quarter and 21.6% year-on-year. This continues to highlight a relatively high dominance of the smaller and below-small housing market segments in Swakopmund, particularly in the area of Matutura. Most of the new homes were mainly delivered through the National Housing Enterprise – a commendable development given the affordability levels in this region. Moreover, Walvis Bay recorded a twelve-month average house price of N$960 000 at the end of March 2022, up by 0.2% quarter-on-quarter and 22.1% year-on-year. This is also expected as all bonds registered in Walvis Bay over the last 12 months fall in the smaller segment, and stretches across the areas of Kuisebmond, Narravile and Meersig. Lastly, Henties Bay witnessed a sprout in house price growth of 63.4% year-on-year to N$ 1 425 000 at the end of March 2022. This continues to paint the increasing relevance for holiday home market.
North and South
The northern house price index posted a twelve-month average contraction of 5.7% at the end of March 2021. This is the deepest contraction recorded since April 2014 and points the dominance of the small housing segment and a downward moderation in sales activity. The volume index is nonetheless starting to show firm signs of recovery from a negative growth territory seen in the last quarter, marking a twelve-month average growth of 0.0% at the end of March 2022. This reflects a considerable delivery of housing in Rundu, Oshakati, Grootfontein, Oshakati, Ondangwa, Outapi, Oshikuku, Omuthiya and Eehnana, to mention just a few. As the cost-of-living increases combined with constrained housing affordability in the central region, we view the semigration trends and considerations for quieter life to be driving demand for residential property in this region. Looking ahead, we expect demand to moderate as interest rates increase, but we don’t expect these dynamics to materially impact price developments in the region.
The southern house price index has performed poorly compared to the rest of the regions, posting a 12-month average contraction of 7.4% at the end of March 2022. The same trend was also observed in respect of the volume index, which recorded a contraction of 9.2% - the deepest contraction since May 2020. During the period under review, a sizeable share of sales activity was mainly observed in Keetmashoop and Mariental. The buyers’ profile is mainly characterized by joint bonds and to a certain extent by female individuals, implying that this market is perceived to be attractive to those that regard it as a primary place of residence and not necessary for investment such as the “buy-to-let” market. Furthermore, the average age for this market was calculated around 41 years old, further supporting the above narrative. Going forward, we maintain the same view as painted for the northern region.
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