Housing Index - First National Bank

Housing Index
First Quarter 2008
Economy Limits Housing Market Correction
This report presents a review of house price
the index grew by 16%. However, the index grew by 13.54%
between the last quarter of 2007 and the first quarter of
2008, after falling by nearly 10% between the third and final
quarter of 2007. This shows that some confidence is returning
to the housing market, although it is early days and therefore
we should not as yet read a lot into the latest trend reversal.
developments for the first quarter of 2008. The index
tracks changes in average house price valuations on
a quarterly basis. The index is calculated from a
weighted average of the monthly FNB valuation data
of various suburbs. Only suburbs with regular
The fact that Bank of Namibia did not adjust interest rates
recently, unlike SARB has provided some financial relief to
potential buyers. Data from the Deeds Office also indicate,
although we have only data for first three months of 2008,
that there is some resurgence in the housing market in 2008,
following a near dismal performance last year. Of the 685
residential bonds registered for the first quarter of 2008, 154
were for January, with a further 275 registered in February,
with the balance in March.
valuations are presented in this report. The objective
of the FNB housing index is to provide an indicative
overview of what is currently taking place in the
housing market.
Figure 1 shows that the index recovered in the first quarter
of 2008 after falling aggressively since the second quarter
of 2007. Between first quarter of 2006 and the latest quarter
Figure 1: Windhoek Quarterly House Price Index
(Base: Q1 of 2006)
130.00
127.27
123.74
125.00
120.22
120.00
120.69
116.08
115.00
113.46
110.00
105.00
102.24
100.00
100.00
99.63
95.00
90
Q1 of
2006
Q2 of
2006
Q3 of
2006
Q4 of
2006
Q1 of
2007
Q2 of
2007
Q3 of
2007
Q4 of
2007
Q1 of
2008
Source: FNB Namibia Valuation Data
FNB Housing Index First Quarter 2008
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Figure 2: The distribution of house sales for Windhoek for first quarter of 2008
50%
17.52%
45%
40%
35%
30%
10.22%
Windhoek Central
5.11%
5.84%
Rocky Crest
Wanaheda
5.84%
Pionierspark
4.82%
1.75%
Okuryangava
Otjomuise
4.38%
Kleine Kuppe
Khomasdal
Katutura
Hochland Park
Hakahana
Goreangab
Eros Park
Dorado Park
Cimbebasia
Academia
0%
Olympia 2.77%
4.82%
6.13%
0.15%
2.19%
1.31%
0.73%
Brakwater
5.40%
0.58%
5%
Auasblick
10%
2.19%
15%
Klein WIndhoek
20%
8.91%
9.34%
25%
Source: Deeds Office and FNB Research
However, as we speculated in previous editions of the index
most of the transactions are taking place in the lower end
of the market as confirmed by the Deeds Office data. In fact,
Khomasdal accounts for nearly 18% of residential deeds
registrations for January to March 2008, followed by Windhoek
Central and Cimbebasia (see above).
However, in line with the current economic environment the
Deeds Office data show that quite a significant amount of
the bond registrations were for the refinancing of existing
property. In fact, of the 120 bonds registered for Khomasdal,
nearly 45% were for refinancing purposes as owners are
delving into their house equity. For Hochland Park the ratio
of refinancing was 52% over the same period. This tendency
explains the ambiguity in the housing index – i.e. the index
starts to increase even as the economic environment
deteriorates as a result of the rising cost of living. Home
owners are increasingly valuating their properties to assess
the level of equity and not necessarily to dispose of their
houses.
Table 1: Quarterly Changes in House Valuations Indices by Suburb
Suburbs
Indexes
Quarter 3
of 2007
Quarter 4
of 2007
Quarter 1
of 2008
Percentage
change from
Q4-07 to Q1-08
Academia
145.59
146.72
143.46
-2.2%
Auasblick
-
63.53
112.94
77.8%
Brakwater
-
90.38
106.22
17.5%
Cimbebasia
114.29
109.85
115.57
5.2%
Dorado Park
116.59
123.06
132.82
7.9%
Eros Park
126.09
108.68
127.53
17.3%
Goreangab
147.41
138.58
156.46
12.9%
Hochland Park
106.06
112.82
122.43
8.5%
Katutura
122.88
121.86
129.19
6.0%
Khomasdal
127.87
136.99
145.95
6.5%
Klein Windhoek & Ludwigsdorf
124.56
101.57
109.58
7.9%
Kleine Kuppe
107.14
118.31
110.05
-7.0%
Okuryangava
153.03
148.53
168.69
13.6%
Olympia
141.80
123.96
117.93
-4.9%
Otjomuise
130.78
138.64
147.88
6.7%
Pionierspark
114.77
110.72
114.98
3.9%
Rocky Crest
126.02
128.59
133.78
4.0%
Wanaheda
115.56
123.87
130.59
5.4%
141.39
130.21
149.24
14.6%
Windhoek Central *
Source: FNB Namibia Valuation Data
FNB Housing Index First Quarter 2008
* Windhoek Central includes Windhoek North & West, Suiderhof, Rhino Park and Ausspannplatz.
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DV8 SAATCHI & SAATCHI
Figure 3: Private Sector Credit Extension and Mortgage Advances (y-o-y growth)
50%
39%
40%
30%
17%
20%
10%
15%
10%
APR 08
FEB 08
OCT 07
DEC 07
AUG 07
APR 07
JUNE 07
FEB 07
OCT 06
DEC 06
AUG 06
JUNE 06
FEB 06
APR 06
DEC 05
OCT 05
AUG 05
JUNE 05
FEB 05
APR 05
DEC 04
OCT 04
AUG 04
JUNE 04
FEB 04
APR 04
DEC 03
OCT 03
AUG 03
JUNE 03
APR 03
7%
0%
-10%
-20%
y-o-y growth private sector credit extension
y-o-y growth residential mortgage advances
Source: Bank of Namibia
The table showing the developments in residential indices shows that most of the suburbs experienced more and perhaps
better average valuations since the last quarter of 07, except for Kleine Kuppe, Olympia and Academia. Overall the demand
for residential property is slowing down. Bank of Namibia data on mortgage advances shows a serious deceleration in the
demand for credit for residential property. As at the end of April, mortgage advances grew by 10% y/y compared to annualized
growth rates in excess of 20% not so long ago. Similarly, total private sector credit extension is slowing down with an annualized
growth rate of 7% as at the end of April 2008.
Conclusion
First quarter data for 2008 shows that the economic environment is increasingly pushing home owners to extract equity through
refinancing as oppose to actually selling their houses. This may suggest that the residential property market is tight. The fact
that Bank of Namibia has not followed SA in increasing their interest rate to dampen inflation expectations has provided some
relief to home-owners and potential buyers. However, the growth in residential mortgage loans is starting to slow further which
may suggest that the housing market is very much linked to what is happening in the rest of the economy, particularly as the
cost of living is going up on a monthly basis. Therefore, the trend of equity extraction by Windhoek residents will continue for
some time.
FNB Housing Index - First Quarter 2008
Authored by: Daniel Motinga & Erwin Karipata
Enquiries: Erwin Karipata, Tel: +264 61 299 2296, Fax: +264 61 225 994, E-mail: [email protected]
5th Floor, First City Centre, Levinson Arcade, Windhoek
Methodology: The FNB House Price Index is based on a weighted average of residential valuations done by the FNB Valuations Division.
Disclaimer: The information in this publication is derived from sources which are regarded as accurate and reliable,
is of general nature only, does not constitute advice and may not be applicable to all circumstances.
www.fnbnamibia.com.na
FNB Housing Index First Quarter 2008
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