Market Review - Feb/Mar '25
Housing prices peak in over two years with an uptick in buying activity
Housing prices peak in over two years with an uptick in buying activity
Key Highlights of Quarter 3 of 2024- The FNB House Price Index printed a 12-month average growth of 7.0% at the end 3Q24 compared to 1.7% at the end of 2Q24 and 3.3% in 3Q23.
- The 12-month national weighted average house price was recorded at N$1,303,179 in 3Q24 above the N$1,263,673 in 2Q24 and the N$1,218,086 in 3Q23.
- Volumes remain in contraction, albeit lower, at -8.2% in 3Q24 on a 12-month average from -17.7% in 2Q24 and -28.3% in 2Q23.
The FNB House Price Index printed a 12-month average growth of 7.0% in 3Q24 which was the highest growth recorded since 3Q21 compared to a growth of 1.7% observed in 2Q24 and is significantly above the 3.3% growth in 3Q23. The growth rates for the small, medium, large and luxury segments stood at 1.4%, -0.3%, -6.5% and -4.4%, respectively. From a regional perspective, most regions posted positive growth with the central, coastal and northern regions growth rates improving to 6.9%, 2.7% and 1.6%, respectively. Whilst the southern region fell deeper into contraction at -4.0% from a 2Q24 contraction of 1.2%.
The overall national house price now stands at N$1,303,179 at the end of 3Q24 - above the N$1,263,673 recorded in 2Q24 and the N$1,218,086 in 2Q23. The 12-month moving average prices for the central, coastal, northern, and southern regions stand at N$1,659,000, N$1,459,000, N$879,000 and N$851,000 respectively.
During the period under review, the Bank of Namibia continued easing interest rates with a unanimous cut of 25bps in December 2024 bringing the repo rate to 7.00%. This along with the amended tax regulations of reduced rates and tax refunds have availed additional disposable incomes to consumers. Conversely, inflation remained unchanged at 3.0% in November 2024 with expectations of potential upticks especially in the housing and utilities category. Therefore, the net impact of any favourable economic conditions on the housing market are expected to be minimal. We continue to only expect conditions in the property market to improve in the medium term.
Conclusion
The upswing in the FNB House Price Index is mainly driven by an increase in housing prices and smaller contractions in transaction volumes. This positive momentum could be indicative of improved demand by consumers for residential property however there remains cashflow constraints as evidenced by the increased demand for short-term credit. Household indebtedness is still high thereby necessitating the need for additional cash despite the recent tax relief measures and easing interest rates. Regionally, the central, coastal, and northern regions all drove the increased housing prices whilst the southern region remained in contraction.
From a supply side perspective, the backlog of serviced land remains a concern. Regionally, transaction volumes improved with the central region moving out of negative territory and the coastal and northern posting fewer contractions however, the southern region remained unchanged. The delivery of land however has had a significant uptick driven by the central, northern and southern regions posting positive growth however the coastal region fell deeper into contraction.
Therefore, with increased prices expected from higher demand and expectations of increased housing and utilities inflation coupled with the low supply of serviced land, we expect the FNB House Price Index to continue its upward momentum albeit at a slower pace. This is due to the slow growth in mortgage credit demanded and the affordability bottlenecks households face, which is likely to dampen the demand in the residential property market.
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