Rent prices slip further

06 April 2021 | Infrastructure

The FNB Residential Rental Index posted an annual contraction of 2.1% at the end of December 2020, from -0.8% recorded in December 2019. This brings the national weighted average rent to N$6 747 at the end of December 2020, compared to N$6 991 recorded over the same period in 2019.
The rent price for a 1-bedroom unit has averaged N$3 670 on an annual basis and spurred growth of 4.9% y/y from -6.5% y/y recorded a year ago. Affordability within the 2-bedroom, 3-bedroom and more-than-3-bedrooms units, on the other hand, continues to be on an uphill path, with annual rent prices recording contractions of 2.3%, 5.0% and 3.4% y/y to N$6 882, N$9 728 and N$17 121, respectively.
“We view the prevailing fundamentals in the rental market to be permeated by three key themes,” says Frans Uusiku, FNB Market Research Manager. “Firstly, the deteriorating demand for higher-priced properties means that landlords are seemingly left with little choice but to curb their expectations when setting their asking price.
“Secondly, many short-term and leisure rental properties moved onto the long-term rental market in 2020, after a sharp decline in tourism activity potentially due to Covid-19 induced travel restrictions. Lastly, we are also starting to see a growing interest amongst tenants choosing to take advantage of lower interest rates to buy houses, whilst some are opting to move in with families, mainly due to job losses and/or reduced income.

‘Oversupply’
“This exit of tenants from the rental market means an additional oversupply of rental properties to the already overstocked pool, thereby exerting further downward pressure on the rental price,” Uusiku said.
He said that looking at the regions, Walvis Bay continues to bear the brunt of rental contractions, recorded at -42.2% y/y followed by Oshakati (-30.9 y/y), Ondangwa (26.8% y/y), Rundu (-20.2%), Swakopmund (-16.7% y/y), Okahandja (-5.8% y/y) and Windhoek (-2.1% y/y).
“Conversely, Tsumeb recorded the highest growth in rent prices of 35.8%y/y followed by Ongwediva with 15.2% y/y over the review period.”
Affordability remains an important consideration for consumers in general, but more specifically amongst tenants. “We expect rental growth to remain muted for some time especially across the multi-bedroom segments. The high rental turnover is expected to be a recurrent theme in the wake of weak economic conditions and dominant supplies of rental properties in the market,” Uusiko said.
He added that whilst the expected promulgation of the Rent Control Bill is a welcome development particularly when viewed from a long-term perspective, this is nonetheless poised to keep the already depressed rent prices at bay.