Rent control will affect homeowners: BoN
12 May 2016 20:10pm
WINDHOEK, 12 MAY (NAMPA) Rent control will have dire consequences for homeowners who rely on rent to pay mortgages but will not have any effect on the financial stability of commercial banks.
Deputy Governor of the Bank of Namibia (BoN) Ebson Uanguta raised the concern at the launch of the 2016 Financial Stability Report here on Thursday.
If their (home owners) budgets cannot afford to pay that rent, they are likely to lose that house.
Last month, President Hage Geingob and members of the Affirmative Repositioning (AR) movement agreed upon operationalising a rent control board. Both parties agreed to speed up the implementation of such a board as set out in the Rent Ordinance 13/1977, which will regulate rental rates and resolve any disagreements arising from rentals. The meeting also agreed that Prime Minister Saara Kuugongelwa-Amadhila will summon the Namibia Estate Agents Board to review and address the escalating property prices before 01 August 2016.
Uanguta made the example that if the control board imposes a N.dollars 3 000 rent for a house per month while the house mortgage payment is N.dollars 7 000 per month, the owner will be forced to pay the difference out of their pocket.
He assured the nation that despite the unaffordable house prices in the country, Namibia will not face a housing bubble in the near future.
Experts at the International Monetary Fund (IMF) produced a study that predicted the high likelihood of a housing bubble burst and possibly a financial crisis in Namibia if the housing market continues to climb at the current pace. Although the study cautioned that it based its premise on anecdotal evidence and limited historical data, it does present various scenarios that it could result in a bubble burst in the housing market and collapse of the construction and real estate sectors. A bubble burst in the housing market refers to sky-high housing prices that eventually drop, while there is an increase in foreclosures because owners can no longer afford such houses that are now worth less than the mortgages at banks.
I give the assurance that no housing bubble will take place in the near future unless there is a drastic change in the supply of houses in the market; then I will start worrying about a bubble, said Uanguta.