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% developments for the first quarter of 2008. The index between the last quarter of 2007 and the first quarter of 2008, after falling by nearly 10% between the third and final tracks changes in average house price valuations on quarter of 2007. This shows that some confidence is returning a quarterly basis. The index is calculated from a to the housing market, although it is early days and therefore weighted average of the monthly FNB valuation data we should not as yet read a lot into the latest trend reversal. of various suburbs. Only suburbs with regular The fact that Bank of did not adjust interest rates valuations are presented in this report. The objective recently, unlike SARB has provided some financial relief to of the FNB housing index is to provide an indicative potential buyers. Data from the Deeds Office also indicate, overview of what is currently taking place in the although we have only data for first three months of 2008, that there is some resurgence in the housing market in 2008, housing market. following a near dismal performance last year. Of the 685 Figure 1 shows that the index recovered in the first quarter residential bonds registered for the first quarter of 2008, 154 of 2008 after falling aggressively since the second quarter were for January, with a further 275 registered in February, of 2007. Between first quarter of 2006 and the latest quarter with the balance in March.

Figure 1: 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

100.00 102.24 100.00 99.63

95.00

90 Q1 of Q2 of Q3 of Q4 of Q1 of Q2 of Q3 of Q4 of Q1 of 2006 2006 2006 2006 2007 2007 2007 2007 2008

Source: FNB Namibia Valuation Data

FNB Housing Index First Quarter 2008 PAGE 1 Figure 2: The distribution of house sales for Windhoek for first quarter of 2008

50%

45%

40%

35% 17.52%

30%

25%

20% 10.22% 9.34% 15% 8.91%

10% 6.13% 5.84% 5.84% 5.40% 2.19% 5.11% 2.19% 4.82% 4.82% 1.75%

5% 1.31% 4.38% 0.73% 0.58% 0.15%

0% 2.77% Olympia Auasblick Eros Park Academia Brakwater Wanaheda Goreangab Cimbebasia Rocky Crest Pionierspark Dorado Park Windhoek Central

Source: Deeds Office and FNB Research

However, as we speculated in previous editions of the index property. In fact, of the 120 bonds registered for Khomasdal, most of the transactions are taking place in the lower end nearly 45% were for refinancing purposes as owners are of the market as confirmed by the Deeds Office data. In fact, delving into their house equity. For Hochland Park the ratio Khomasdal accounts for nearly 18% of residential deeds of refinancing was 52% over the same period. This tendency registrations for January to March 2008, followed by Windhoek explains the ambiguity in the housing index – i.e. the index Central and Cimbebasia (see above). starts to increase even as the economic environment deteriorates as a result of the rising cost of living. Home However, in line with the current economic environment the owners are increasingly valuating their properties to assess Deeds Office data show that quite a significant amount of the level of equity and not necessarily to dispose of their the bond registrations were for the refinancing of existing houses.

Table 1: Quarterly Changes in House Valuations Indices by Suburb Percentage Suburbs Quarter 3 Quarter 4 Quarter 1 change from Indexes of 2007 of 2007 of 2008 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% Windhoek Central * 141.39 130.21 149.24 14.6%

Source: FNB Namibia Valuation Data * Windhoek Central includes Windhoek North & West, Suiderhof, Rhino Park and Ausspannplatz.

FNB Housing Index First Quarter 2008 PAGE 2 Figure 3: Private Sector Credit Extension and Mortgage Advances (y-o-y growth)

50%

39%

40% & SAATCHI SAATCHI DV8

30%

20% 17% 10%

10% 15% 7% 0% FEB 04 FEB 05 FEB 06 FEB 07 FEB 08 APR 03 APR 04 APR 05 APR 06 APR 07 APR 08 OCT 03 OCT 04 OCT 05 OCT 06 OCT 07 OCT DEC 03 DEC 04 DEC 05 DEC 06 DEC 07 AUG 03 AUG 04 AUG 05 AUG 06 AUG 07 JUNE 03 JUNE 04 JUNE 05 JUNE 06 JUNE 07 -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 PAGE 3