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Namibia Nearing a Housing Bubble?

Namibia Nearing a Housing Bubble?

According to Namibian economist Martin Mwinga, a housing bubble is easily detectable upon analyzing how indebted a household is, and how expensive property is in comparison to what the owner can afford. New Era recently reported that Namibia’s housing sector has experienced infrastructural rough patches and therefore questioned whether a housing bubble is in the near future.

For starters, when labor and building material is considered, newly built housing in the country is priced higher than the amount it takes to build, New Era reported. Homes in Namibia sell for around $46,000 and require capital upwards of $20,000 to build.

“It will have a gradual effect, however, and a small impact on Namibia,” Namene Kalili, Manager of Research and Competitor Intelligence at FNB Namibia said of rising unemployment, interest rates and influxes in housing availability.

When there’s a spike of available houses on the market, property values decrease. Though in order for a housing bubble to occur, New Era reported, high repo rates must contribute to interest rate hikes, which will create inflation and quickly increase housing prices. During periodic housing bubbles, homes become economically unattainable because they are outrageously valued.

Despite Namibia’s National Housing Enterprise (NHE) selling houses with a market value of $71,000 for $41,000, a housing bubble isn’t expected to hit the nation. While the percentage of people who pay a home mortgage in the U.S. is high, only 22 percent of homes in Namibia are mortgaged, New Era reported.

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“Although there might be small bubbles forming in some few suburbs, especially in Windhoek, there is no widespread property market bubble that could burst and threaten the realisation of Vision 2030,” Mwinga said.

According to New Era, the International Monetary Fund (IMF) warned bank sector authorities about commercial bank lending to homeowners. When potential homeowners are approved for loans that they are unlikely to repay, risk of housing bubble occurrences heighten. Last year, the IMF assisted officials in implementing “preventative measures” prior to a housing bubble occurrence as well as solutions upon a housing bubble burst.