Africa-Press – Namibia. THE construction sector continues in the doldrums as building plans approved continue on a downward trend.
Approved building plans in Windhoek declined by 53,5% year-on-year (y/y), but rose sharply by 110% y/y at Swakopmund
during January 2023, according to Simonis Storm Securities.
On a monthly basis, approvals declined by double digits in January 2023 for both Windhoek and Swakopmund.
Approvals were mainly for additions and new residential properties in Windhoek and at Swakopmund, with only three commercial plans approved in Windhoek and none at Swakopmund.
“This is likely to keep revenues of local construction companies suppressed, as smaller scale projects typically have smaller margins than larger scale projects in the commercial and industrial segments of the property market,” said Simonis.
The total value of approved plans was N$23,1 million in Windhoek, compared to N$49,2 million in December 2022 and N$139,2 million at Swakopmund, compared to N$53,8 million in December 2022.
In addition to pipeline activity, actual construction activity also remains on a declining path.
Building completions declined 20,2% in Windhoek y/y and 10,6% at Swakopmund y/y during January 2023.
Buildings completed were mainly in the new residential and residential additions segment of the market in Windhoek, whereas new residential and commercial projects account for most of the completions at Swakopmund.
“With interest rates set to increase by another 25bps if the Monetary Policy Committee (MPC) does not see monthly inflation data points moving closer to 6% (the last print being 7,0% y/y in January 2023), we expect that the rise in building material costs from last year and high interest rates will weigh on consumer demand for new building activity going forward,” said Simonis.
Corporate entities have been net re-payers of mortgage debt since the Covid-19 pandemic. Remote working operational models has decreased the demand for office space and some corporates took advantage of low interest rates to repay debt faster.
According to Simonis, following a short-lived increase in mortgages among corporates, most of 2022 saw corporates repaying their mortgage debt. On the other hand, household mortgage growth has averaged a meagre 3,8% y/y in the last three years.
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