WINDHOEK, Namibia (CU)_The Macroprudential Oversight Committee established by the Bank of Namibia (BoN) conducted a recent analysis which found that the Southern African nation’s financial system remains “resilient, solvent and sound”, despite the challenging economic conditions brought about by the COVID-19 pandemic and other circumstances. One key factor that prompted optimism among the committee was the absence of any undue upward pressure on asset prices which could otherwise have adverse effects on the stability of the financial system. Meanwhile, the Governor of the BoN, Johannes ǃGawaxab, who also chairs the committee, observed that there is a significant positive equity build-up in current housing valuations which are exceeding outstanding mortgage balances by a substantial margin.
According to the Central Bank’s analysis for the month of June, homeowners in Namibia owe about N$26.1 billion in home loans to commercial banks, while these properties are valued at N$41.5 billion. This means that these households have amassed N$14.9 billion equity on their houses, which banks may permit to use as collateral in acquiring additional property. “If an individual decides to sell the property, he or she will be able to repay/settle the outstanding loan with the commercial bank concerned and still remain with a surplus to either save or invest or pay a deposit on a new property,” BoN’s spokesperson Kazembire Zemburuka said.
According to the spokesperson, one of the main reasons for this is the time span for which mortgages have been held by households at most of the major commercial banks. He pointed out that most of these home loans have been on the books for more than 10 years, during which households have been repaying their mortgages, reducing their loan balance. “Moreover, house prices increased significantly above the overall average inflation rate for Namibia from 1994 to 2017 resulting in a major increase in the equity build-up,” Zemburuka said.
Mortgages continue to remain a major source of income for commercial banks in Namibia, with half of the banking sector’s loan books tied to houses and other properties, and generating more than N$300 million in revenue every month.
