Investors capitalising on low property prices

PHILLEPUS UUSIKUThe accommodative monetary policy and struggling rental market has created a window of opportunity for property investors to capitalise on distressed sales.According to Frans Uusiku, Market Research Manager at First National Bank (FNB), the real estate industry suggests that properties have reduced in value by up to 20% depending on property value, with the higher-end asset class devaluing the greatest. As such, home buying activity in the medium to higher- end of the market has been largely characterised by repeat buyers, accounting for 74% of mortgage sales in the first quarter of 2021, he said.This is consistent with the regulatory rule on loan-to-price ratio, and secondly, most of these property investors are likely to have greater access to savings to fund the required down payment.However, housing affordability within the small housing segment remains constrained due to limited stock and slow pace of land delivery. Overall growth in land sales recorded an annual growth of 4.4% at the end of March 2021 from 85.5% recorded a year earlier.“We continue to reiterate the need to accelerate the delivery of serviced land given that about 70% of the Namibian workforce can only afford a house that is priced below N$1.5 million,” he said.Given these developments, the FNB House Price Index (HPI) recorded an annual growth of 7.2% year-on-year at the end of March 2021 compared to -5.6% year-on-year recorded over the same period in 2020.This is the highest growth figure recorded since October 2016 and points to the pass-through effects of monetary policy easing that started in mid-2019. The national weighted average house price is now recorded at N$1 176 882 from N$1 038 577 in March 2020, Uusiku pointed out.Regions The northern region is the only region that delivered a double-digit index growth in house price of 23.0% year-on-year at the end of March 2021 compared to a contraction of 18.7% seen over the same period of 2020.“We view this as indicative of a stable residential property market, and further demonstrating a firm alignment of supply and demand forces with respect to housing,” Uusiku said.On average, a house in the northern region was priced at N$921 000 at the end of March 2021 compared to N$747 000 realised in March 2020, he pointed out.In addition, the central residential property price index posted growth of 4.7% year-on-year compared to 8.2% year-on-year recorded over the same period of 2020. On average, a house in the central region is now priced at N$1 417 000. The surge in central house prices was mainly driven by Windhoek and Gobabis, which showed annual growth rates of 1.1% and 7.0%, respectively, Uusiku said.Conversely, Okahandja was the worst performer, with an annual contraction in house price of 6.5% at the end of March 2021. These dynamics appear to highlight the ongoing developments of affordable housing in Osona Village, the market researcher said.CoastFurthermore, home buying activity in the coastal region has generally trended downwards since the beginning of 2020. “We attribute this development to widespread affordability issues and secondly, the adverse economic impact of the pandemic due to a relatively large exposure of the coastal economy to the tourism industry,” he added. As a result, the coastal residential property price index growth slowed to 5.4% year-on-year at the end of March 2021.The coastal region is the worst performer in relation to other jurisdictions and points to a diminishing purchasing power of the coastal economy, in our view. On average, a house in the coastal region is now priced at N$1 179 000, he said.Lastly, the southern residential property price index posted growth of 6.8% year-on-year in March 2021 compared to a contraction of 13.6% recorded in March 2020. On average, a house in the southern region was priced at N$866 000 in March 2021 compared to N$811 000 recorded in March 2020.Indeed, the southern region recorded the highest growth of 11.9% year-on-year in March 2021 with respect to land delivery as it was found to be far more affordable compared to the rest of the regions, with the average land price of N$474 /m2, Uusiku said.

Investors capitalising on low property prices

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Namibian Sun 2024-11-25

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Investors capitalising on low property prices

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Namibian Sun 2024-11-25

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