Why you can’t afford a home

October 3, 2014, 11:05am

Why you can’t afford a home

 

 

House prices in Namibia have grown faster than anywhere else in the world except for Dubai. Namibian families now have to earn more than N$20 000 per month in order to afford an average-sized property.
The average price of a home in Namibia is N$774 000.
To afford housing in the lowest price segment, a family must earn at least N$15 000 a month.
This was revealed by FNB Namibia’s monthly house price index for June.
“Less than 10% of households in the country can afford a property in the lower price segment,” said FNB Namibia’s Manager for Research and Competitor Intelligence, Namene Kalili.
“It is this disparity between supply and demand that is driving house prices upwards, so much so that Namibia had the second highest house price increase in the world after Dubai.” With the market remaining “grossly undersupplied”, he predicted that house prices would end the year approximately 15% higher than they were at the end of 2013.

Why so expensive?
The most obvious cause given by industry experts for Namibia’s excessive annual property price growth is poor housing supply, which according to Kalili plummeted in 2008 and has since battled to catch up.
“Property prices are normally a function of local supply and demand, and one factor that determines the value of property is ‘fair market value’, the price a buyer would willingly pay and a willing seller would accept, where neither party is under duress,” says Windhoek Municipality spokesperson Joshua Amukugo.
This principle, he says, applies in the context of a variety of factors on the ground. “Prices of property are normally influenced by a variety of factors, and not only by the absence of a regulatory body,” Amukugo says, challenging an assertion he made himself in April, when he called on property developers to be lenient in determining prices and property fees.

From its own side, he cites the City of Windhoek’s current ‘public private partnership’ initiative, through which it outsources its own responsibility to service land, to private companies.
“The reasons for establishing such partnerships vary but generally involve the financing, design, construction, operation and maintenance of public infrastructures and services,” Amukugo says.
“Such an approach accelerates the council’s endeavours to increase the number of erven delivered within a shorter period of time.”
To date, the initiative boasts the recent completion of Otjomuise’s Extension 4 and a similar development to be known as Academia Extension 1, which is currently 40% complete.
Upset prices for the Academia plots, Amukugo says, hover between N$400 000 and N$700 000, but are expected to go up during bidding.
Otjomuise Extension four has been completely sold out.

Not buying it
“The Namibian economy is generally characterised by cartel behaviour and price-fixing. The housing sector is not immune either,” says Michael Gawaseb of the Namibia Consumer Trust (NCT).
The association aims to educate consumers in various local sectors on their rights, and is on record for criticising the population’s “general reluctance” to proactively influence public policy.
“Any effort can only succeed if price-fixing by lawyers and in the financial services sector (banks), amongst others, is addressed,” Gawaseb told Namibian Sun yesterday.
“The estate agents’ board is certainly outdated as it, by design, is promoting profit-making by having its majority board membership comprised of estate agents who no doubt benefit from the state of affairs.”
In Namibia, government interventions to try and address a housing backlog of more than 100 000 units have included the much-hyped Mass Housing Project last year, and the Targeted Intervention Programme for Employment and Economic Growth (TIPEEG).
Despite these initiatives, Kalili’s most recent assessment of developer activity was that this “has not filtered meaningfully into the new housing supply numbers”.
With 61 property stands mortgaged throughout the entire month of June, overall volumes trend downwards, and house prices are expected to end the year 15% higher than last year.
“We know the City of Windhoek and others regularly seek to recoup costs even if it means selling people’s houses,” the NCT’s Gaweseb says.
“Serviced erven have also been used as cash cows to fuel high salaries of technocrats in town councils, who basically run the show, as many councillors may lack the academic abilities to comprehend consequences of policies,” he says.
“The City of Windhoek is, for example, duplicating safety services in the form of the City Police without having the tax base to sustainably fund such a service. Subsequently water, electricity and land (through auctions) indirectly fund this duplication.”

Widening gap
The average price for a house in Windhoek stood at N$381 000 in 2009.
By 2013, this median had increased to N$640 000, and to N$720 000 by last count this year.
That represents an 85% increase in the average house price over a five-year period, and a 13% annual increase. The Knight Frank Global House Price Index, which slotted Namibia in second place in terms of house price increases - above Turkey, Ireland and Columbia - found that global house prices slowed from 7.1% in 2014’s first quarter, to 5.2% between April and June. Namibia’s annual price growth rose to 16% over the same period, as population growth, inflation and anticipated urbanisation continue to exercise their own influences over the market.
The Namibia Statistics Agency’s (NSA) Statistician-General, Dr John Steytler, who announced the latest population projections yesterday, questioned the country’s capacity to house future citizens.
The NSA’s most recent projection for the next 30 years is that the population will grow from the current 2.1 million to 3.4 million by 2041.
“The policy implications are obvious,” Steytler said.
“Where will everybody stay and what will be the implications for housing delivery and house prices? How will the existing physical and social infrastructure of Windhoek cope with the higher population? And what will the loss of productivity due to traffic congestion be?”
The NSA said the percentage of citizens expected to live in urban areas by 2041 will have grown to 67%, from 43% currently.
“It is projected that over a third of Namibia’s population will live in the Khomas and Erongo regions by 2041,” Steytler said.

Denver Isaacs Namibian Sun