Rent prices slip back into negative territory
19 November 2020 | Economics
This brings the national weighted average rent to N$7 091 at the end of September 2020, compared to N$7 164 recorded over the same period in 2019.
“The sudden return of the rental index growth into negative territory affirms the pass-through effects of Covid-19 pandemic on the rental market,” says Frans Uusiku, FNB Market Researcher. “This is unsurprising given the notable job losses and reduced income for the most part of the workforce as the country implemented Covid-19 containment measures during this period.”
Government reported that 8 000 employees were dismissed during the first two quarters of 2020, compared to 950 employees dismissed over the same period in 2019.
Uusiku said the demand dynamics remain highly skewed towards the lower end of the market as affordability becomes increasingly challenging.
“In effect, the annual average rent price for a 1-bedroom and 2-bedroom unit grew by 1.0% and 0.5% y/y, respectively to N$3 600 and N$7 006 as at September 2020. Conversely, the 3-bedroom and more-than-3 bedrooms units recorded annual contractions in rent price of 1.5% and 8.2% y/y respectively to N$9 937 and N$16 657 at the end of September 2020.
“Generally, tenants tend to move in with family or share with friends in tough economic times, and this reduces the overall demand for rental units. This results in landlords offering reduced rents, not only to retain quality tenants but also to achieve the desirable level of occupancy to remain afloat. We see the emergence of this theme playing out in the Namibian rental market particularly in the high-end segment,” Uusiku added.
At regional level
In the regions, growth in rent prices remained bleak in towns where Covid-19 induced retrenchments have been reported – mainly due to the relative dominance of industrial and hospitality related sectors.
More specifically, Walvis Bay continues to bear the brunt of a deeper contraction in rent prices of 43.9% y/y, followed by Ondangwa (-30.3% y/y), Rundu (-20.5% y/y), Oshakati (-17.0% y/y), and Windhoek (-2.0% y/y). The only towns that have spurred growth in rent prices are Ongwediva and Okahandja with 5.2% and 4.3% y/y, respectively.
Looking ahead, Uusiku says: “The shortage of quality tenants is likely to remain an issue as the economy continues to grapple with the protracted economic recession. This signifies the dawn of a renter’s market - one that would compel landlords to offer competitive rates, especially in the upper market areas. That is to say, offering a discount of between 15% - 20% of the advertised rent.
“Meanwhile, we retain our view that the dynamics around the adoption of remote working and multi-family renting cultures are likely to be one of the key defining features of demand and supply forces in the rental market as the global community anticipates the resurgence of the second wave of Covid-19 pandemic,” Uusiku concluded.