… as a result of current economic climate
By Ndapewoshali Shapwanale
Separate surveys have indicate that property across most towns is selling below the asking price and in some cases selling below valuation, First National Bank Group economist Daniel Kavishe said.
This reality, the economist said is a symptom of the current economic environment as well as the result of strict, precise, and exacting credit control acts enforced by Bank of Namibia to discourage from speculative purchases in the segment.
“Undoubtedly, property prices and rental prices remain suppressed in the economy. For now, there is no clear sign regarding when the tide will turn and the sector will recover. We will have to wait and see,” the economist said.
He added that they have also observed substantive declines in demand for property in the high end market and middle segment which has also led to decline in average house prices.
“We attribute this to the embattled state of the consumer who continues to face several pressures in terms of growth in his/her disposable income,” Kavishe said.
Dylan van Wyk of IJG Security agreed with Kavishe that sale prices for property has decreased in light of the current economic climate.
Van Wyk said that the slowdown in the economy has resulted in those wanting to sell property with two options which is to either sell at less than what they actually desire for the property or they will have to hold on to the property longer until the economy can accommodate higher selling prices.
He also said that the oil price situation in Angola also contributed to reduced sale prices in the property market as Angolan nationals stopped buying properties as much as they did at some point. Van Wyk is of the opinion that since Angolan nationals are no longer purchasing at the amounts they used to, property owners looking to sell do not have the Angolan market as a possible buyer.
Rental Prices decline
FNB Namibia recently published their rental index that has shown that rent prices have dropped since March 2019 as the index stood at -5,2%.
Kavishe told The Patriot this week that at this stage, there is no relationship between the drop in rental prices and the sale prices in the property market, but that the index may influence the decision to invest in property in the future.
“The rental data is a new index and as such, consumers are yet to use it as a basis for their decisions within the property market. However in future, you will likely find that the rent prices would signal when to invest in property with the assumption that higher rent will translate to higher yield which could then inform decisions to buy property,” Kavishe explained.
Van Wyk believes that theoretically there is a relationship between the rent prices dropping and the purchase price of property in the market.
He said that most property owners who buy property to lease them out expect that the properties to pay for themselves through the rent collected.
He added that a drop in rent prices means that more pressure is exerted onto the property owner to service the monthly installments on the property.
The index released recently showed that advertised rent charges depicted how the rent prices were affected by the slow-down in the economy as the consumer now had to add holes in their belts with less disposable income.
Charges for one-bedroom to three-bedroom apartments has been recorded to be declining by -1,7% for one-bedroom, -4,6% for two-bedroom and -5,7% for a three-bedroom apartment.
Three-bedroom properties in up-market areas of Windhoek are being rented out for N$10 695 per month, this is a reduction from the N$11 000 that was charged in 2016.
Two-bedroom properties go for N$7 000 per month. The average rent for a one-room is currently N$3 620 a month.
Properties with more that three bedrooms leased in the area of N$18 086 per month at the end of March 2019.
The index also indicated that the trend of requesting deposits from tenants has relaxed in the market, and average deposits dropped by 11,8% at the end of March 2019.
Kavishe said that rental yields continue to wane amidst both lower rents charged and declining property prices.
“Under normal instances, declining property prices would push consumers to rent, resulting in higher average rents. However, with disposable income declining, overall prices have muted, resulting in yields dropping to 7,4% yearly at the end of March 2019,” he said.
With regards to the rent Bill, Kavishe said that the legislature may be may be problematic to implement in its current state, and may not meet the needs of the current market, specifically given the current economic slowdown.
The establishment of the rent control board is in accordance with section 2 (2) and 3 (1) of the Rent Ordinance of 1977.