Africa-Press – Namibia. MOST low-income earning Namibians are pushed in a corner, trading off options whether they should build and buy new homes or fuel their cars and provide food for their households.
Analysts at Simonis Storm say the corner they are in is expected to become more uncomfortable, as the Bank of Namibia squeezes consumers with high interest rates.
“Rising interest rates and the probability of another 100bps repo rate hike before the end of the year will weigh heavily on household budgets, which are already stretched due to high food and fuel prices,” reads a report by the analysts.
This comment follows the release of building data by the City of Windhoek and the Municipality of Swakopmund for the month of May, which show that the pipeline of construction activity looks less promising going forward.
Data from the two municipalities show that approved building plans for May were low.
The City of Windhoek approved 153 building plans in May, 18,6% fewer than 188 in April and 20,7% fewer than 193 in May last year.
For Swakopmund, approved building plans for the month under review stood at 58, also lower than the 95 approved in April this year, but better than the 45 approved in May last year.
The approvals for the two municipalities are worth N$118 million and N$44,7 million for Windhoek and Swakopmund, respectively.
Swakopmund plans are mainly residential, while Windhoekers are mostly adding to their already existing properties, with 114 approved plans set for additions, commercial (two plans), residential (30 plans), pools (two plans) and walls (five plans).
An analysis by Simonis Storm shows a decline in the number of both submitted plans and plans being approved since March 2022, while building completions are slowing down since February 2022 in Windhoek.
From past approved plans, building completions stood at 45 in May 2022 in Windhoek, compared to 86 building completions in April. Last year, May saw 216 completions.
The completed projects had a total value of N$56,2 million (compared to N$70,6 million for projects completed in May 2021) and were mainly for commercial (N$25 million), residential (N$24,8 million) and residential additions (N$5,9 million).
While Windhoek registered dips in completions, at Swakopmund building completions remain on an upward trend since February 2022, indicating better construction activity than in Windhoek, says Simonis Storm analysts.
The decrease in completions in Windhoek could be attributed to high building material prices.
The Simonis Storm report indicated that local building material costs have increased by 13,9% on average when analysing a basket of selected building materials.
Gutters are up 77,7% year-on-year (y/y), steel door frames up 33% y/y, roofing zinc sheets up 16,3% y/y, and cement up 10,5% y/y.
On the flip side, materials used by plumbers and electricians (pipe conduits and copper tubes) saw some of the lowest price increases in May 2022, up by 0,3% y/y and 5,7% y/y, respectively.
These high prices are bad news for builders and potential home buyers, as they negatively influence buyer demand, especially in the low-to-middle income residential market, said Simonis Storm.
At the global level, both houses and building material prices increased considerably after the Covid pandemic outbreak.
“House prices are expected to retreat as interest rates increase, following more aggressive monetary policy tightening in advanced economies,” said Simonis Storm.