Housing market remains stable
21 February 2020 | Economics
According to FirstRand Namibia Market Research Manager Frans Uusiku, the continued recovery in the rental index growth is supported by price pressures stemming from the 2 to 3-bedroom segments, which registered growth of 6.6% and 16.2% y/y compared to corresponding contractions of 10.2% and 11.7% y/y realized over the same period of the preceding year.
The growing participation in the 2 to 3-bedroom segments and the resultant price pressures has brought the average national rent price to N$6 992 as at December 2019. This translates into an annual growth of 3.6%. On a quarterly basis, Swakopmund recorded the highest rental prices in the fourth quarter of 2019, with the average rent recorded at N$9 274 per month.
“This reflects significant growth of 26.6% y/y due to high volumes of rental activity executed under the 3-bedroom segment, whilst it also points to deteriorating affordability of houses in the coastal towns,” Uusiku says.
Windhoek is the second highest with respect to rental prices, with an average rent of N$6 545 per month, reflecting a contraction of 2.5% y/y. Furthermore, the annual contraction in rental prices in the fourth quarter of 2019 was witnessed across other major populated towns such as Ondangwa (-34.7%), Rundu (-22.4%), Ongwediva (-17.1%) with an exception of Oshakati, which saw growth of 6.7% y/y.
“The rebound in rental prices since May 2018 has continued its upward trajectory, although growth remains in negative territory,” Uusiku says. “The notable growth in rental activity for the 2 to 3-bedroom segments and the resultant price pressures, is indicative of an increase in demand for these type of rental units as houses become unaffordable on the back of subdued real wage growth. Nonetheless, the price to rent ratio of “13” means that the national average house price is 13 times the national average rent that could be earned per annum on a residential property.”
He said this implies that the Namibian housing market is still in a stable state and could improve further along with the expected improvement in economic conditions. “We therefore expect rental price growth to mark a positive territory in the first quarter of 2020 before it stabilizes along its long-term sustainable growth path.”