Author Archives: IJGResearch

A total of 218 building plans were approved in September to the value of N$156.6 million. On a year-to-date basis, the City of Windhoek has approved 1,359 building plans, a significant decrease when compared to the 1,965 plans approved over the same period last year. However, the dollar value of building plans approved on a year-to-date basis stood at N$1.560 billion in September, up 1.1% or N$16.5 million over the comparable period last year.

Majority of building plans approved, were for plans of additions to existing structures. Year to date, a total of 1,103 building plans for additions were approved in September, 437 less plans when compared to the same period last year and almost 500 less when compared to the average ytd figure for September over the last 10 years. From a value perspective however, N$764.3 million worth of additions were approved year to date, which compares to N$720.4 million over the same period last year and N$549.3 million average ytd figure since 2006.

Year to date, 126 less residential units were approved when compared to 317 over the same period last year and 132 less than the ytd average since 2006. In dollar terms, N$372.7 million worth of residential plans were approved year to date, more or less in line with the N$373.5 million over the same period in 2015 and N$365.2 million average ytd figure over the last ten years.

The number of commercial units approved in 2016 so far amounted to 65, valued at N$422.7 million. This compares to 108 units, valued at N$449.2 million over the same period last year. On average over the last 10 years, 59 commercial units, valued at N$320.7 million were approved year to date, well below the ytd value for September 2016.

The 12-month cumulative number of building plans approved picked up slightly in September, as depicted by the graph below.  On a 12-month cumulative basis, 1,861 building plans were approved in September, 27.1% less than the same measure for September last year. In value terms however, 12-month cumulative value of plans approved in September was 10.4% higher than the value of plans approved over the same period last year, at N$2.212 billion. The 12-month cumulative number of building plans approved has fallen to a level last seen in 1997, with most of this drop happening during the last 18 months. As a leading indicator for economic activity in the country this reinforces our view that we will see economic growth slow in 2016 and possibly beyond.

The slowdown in the number of building plans approved has been largely driven by a lack of serviceable land in Windhoek as opposed to the popular belief that water restrictions in the Khomas region has been the causal factor. Furthermore, there have been no water restrictions imposed on construction activities around Windhoek. The Municipality has indicated that, there is a high demand for land, but little land left around Windhoek that can be developed.

Anecdotal evidence suggests that the lack of available land has contributed to a large extent to the number of additions applied for over the last 15 years as well as limiting the amount of new plans applied for. As property prices increase due to lack of supply so does the number of people living under one roof which may then lead to additional space added to existing buildings. Children stay with their parents for longer, and families accommodate members who cannot afford to rent, etc. The fact that we have seen a steady decline in additions on a cumulative basis over the last two or so years suggests that value addition to existing properties has become significantly less affordable and that the gains from such additions are now much less pronounced than before.

Half-year revision of our growth expectations

At the beginning of the year, we believed that some growth could be expected in the construction sector, following what we believe will be a large contraction in 2015, mostly due to base effect as a result of three big mines constructed through 2014. However, this view was based on the expectation that we would see the commencement of a number of large government projects during the year, including water and energy projects. We have now revised this view, and believe that these projects will not start until later years. In the meantime, Government has also cut the capital budget aggressively. The slowdown seen in the number of building plans approved also suggest difficult times ahead for the construction industry.   As a result, we have revised down our growth forecast for the construction industry for the year, expecting a contraction of 4.5%.

Going forward, affordability issues are likely to mean that the lack of availability of land will become an even bigger issue than it is at present. In the past the lack of available land has driven increases in property prices, but the limit of affordability is currently being tested, and thus property prices are unlikely to increase at the accelerated rate seen previously.