The construction sector is likely to experience the sixth consecutive contraction in the real value of building plans approved and completed in the second half of this year.
According to Simonis Storm Securities, Windhoek and Swakopmund municipalities approved 2,5% fewer plans this year, with 1 538 compared to the same period in 2020 when they approved 1 577 plans.
“We assume that the construction sector has shrunk due to poor demand for new buildings,” said Simonis.
“Projects completed in the same period decreased by 47,4% since 2020, making this the third consecutive year that the number of projects completed has declined,” said Simonis.
A total of 275 plans were approved in July compared to 340 in July 2022, translating to a 19,1% year-on-year decrease, although the number of projects completed in July increased by 39,4% year-on-year (y/y) from 137 projects in July 2022 to 191 projects completed in July.
The analysts say the value of approvals remains on a steady increase, while the value of projects completed spiked in July this year.
“The value of the projects approved by these municipalities have decreased in Windhoek, dropping by 73,7% y/y, but increased at Swakopmund by 113,6% y/y.
“This is due to 48 projects being completed in July 2023 in Windhoek, compared to 80 in July 2022, while at Swakopmund, 149 projects were completed in July 2023 compared to 49 projects in July 2022,” said the analysts.
Of these projects at Swakopmund, 109 were completed by the Ministry of Urban and Rural Development, with an average value of N$198 322 per project at an average size of 46 square metres.
Simonis says the annual increase in costs of regular maintenance of buildings has decreased, posting an inflation rate of 3,1% y/y in July, compared to the 6,2% average for last year.
The disinflation of services for maintenance was the main driver of lower inflation rates, recording a 1,5% y/y inflation rate in July 2023 compared to the 12,6% y/y peak in November 2022.
Simonis believes poor demand is reflected in the decrease in the number of building plans being submitted for approval. In addition, tight financial conditions for households and businesses due to higher interest rates are leading to less demand for mortgage loans.
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