A total of 121 building plans were approved in July to the value of N$175.4 million. On a year-to-date basis, the City of Windhoek has approved 964 building plans, a significant decrease when compared to the 1,552 plans approved over the same period last year. The dollar value of building plans approved on a year-to-date basis stood at N$1,133.6 in July, down 9.3% or some N$116.2 million over the comparable period last year. The slowdown in the number of building plans has been mainly driven by lack of land available in Windhoek.
A total of 13 more building plans were approved in July than in June. The dollar value of the plans approved in July came in at N$175.4 million, up 12.6% when compared to last month’s figure. 14 more residential units and 98 additions were approved during July. The residential units and additions approved in July were worth N$32.61 million and N$115.72 million respectively. The number of commercial units approved in July amounted to 9, valued at N$27.04 million.
The 12-month cumulative number of building plans approved continued trending down in July, as depicted by the graph below. On a 12-month cumulative basis, 1,879 building plans were approved in July, 30.9% less than the same measure for July last year. In value terms however, 12-month cumulative value of plans approved in July was 1.9% higher than the value of plans approved over the same period last year, at N$2.08 billion. The 12-month cumulative number of building plans approved has fallen to a level last seen in November 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.
The number of building plans approved is determined by the number of additions approved, and of new commercial and residential plans approved by the Municipality every month. Historically, the number of new additions approved has usually surpassed the cumulative number of new commercial and new residential plans approved. As can be seen below, the 12-month cumulative number of new building plans approved for flats and houses has been trending down for the most part since the turn of the millennium. This can be attributed to the undersupply of serviced land as well as the type of properties being built on the available land (multiple units on one erf may show up in the data as a single approved plan in many cases). 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.
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 should sufficient steps not be taken to rectify the shortage. 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.