Rent prices slip back into negative territory
The shortage of quality tenants is likely to remain an issue as the economy continues to grapple with the protracted economic recession.
PHILLEPUS UUSIKU
The sudden return of the rental index growth into negative territory affirms the pass-through effects of Covid-19 pandemic on the rental market.
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.
As a result, this brought 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, this according to FNB’s market research manager Frans Uusiku, in their residential rental index report.
The FNB residential rental index shows that the 12-month moving average growth in rent prices took a dip of -1.3% at the end of September 2020.
The government reported that 8 000 employees were dismissed during the first two quarters of 2020. Hence, the demand dynamics remain highly skewed towards the lower end of the market as affordability becomes increasingly challenging, Uusiku noted.
The adoption of remote working and multi-family renting cultures are likely to be the key defining features of demand and supply forces in the rental market as the global community anticipates the second wave of Covid-19 pandemic.
Segments
The annual average rent price for a 1-bedroom and 2- bedroom unit grew by 1.0% and 0.5% year-on-year, respectively to N$3 600 and N$7 006 as at September 2020, Uusiku pointed out.
Conversely, the 3-bedroom and more-than-3 bedrooms units recorded annual contractions in rent price of 1.5% and 8.2% year-on-year respectively to N$9 937 and N$16 657 at the end of September 2020, he added.
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”, says the market research manager.
Regions
Looking at the regions, growth in rent prices has 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%, followed by Ondangwa -30.3%, Rundu -20.5%, Oshakati -17.0%, and Windhoek -2.0% year-on-year, Uusiku pointed out.
The only towns that have spurred growth in rent prices are Ongwediva and Okahandja with 5.2% and 4.3% year-on-year, respectively, Uusiku added.
Rental yields
Rental yields refer to what the landlord expect as return on an investment property before maintenance fees, tax and other costs are deducted.
Despite a challenging economic environment, rental yields have fared out well in the recent past, settling at 7.8% at the end of September 2020.
“We expect rental yields to remain stable in the short to medium term particularly in the 1-bedroom and 2-bedroom segments on account of unabated housing backlog compounded by a high level of income inequality”, Uusiku said.
Deposit to rent ratio
Overall deposits charged by landlords contracted by 23.8% year-on-year at the end of September 2020 compared to a contraction of 30.8% year-on-year recorded during the same period of 2019.
This was more pronounced in the 2-bedroom and more-than-3-bedrooms segments which contracted by 45.5% and 32.4% year-on-year respectively, compared to contractions of 28.8% and 29.5% year-on-year realized a year ago.
This highlights an oversupply in rental properties on the back of weak tenancy demand and the growing relevance of a multi-family renting culture, he said. [email protected]
The sudden return of the rental index growth into negative territory affirms the pass-through effects of Covid-19 pandemic on the rental market.
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.
As a result, this brought 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, this according to FNB’s market research manager Frans Uusiku, in their residential rental index report.
The FNB residential rental index shows that the 12-month moving average growth in rent prices took a dip of -1.3% at the end of September 2020.
The government reported that 8 000 employees were dismissed during the first two quarters of 2020. Hence, the demand dynamics remain highly skewed towards the lower end of the market as affordability becomes increasingly challenging, Uusiku noted.
The adoption of remote working and multi-family renting cultures are likely to be the key defining features of demand and supply forces in the rental market as the global community anticipates the second wave of Covid-19 pandemic.
Segments
The annual average rent price for a 1-bedroom and 2- bedroom unit grew by 1.0% and 0.5% year-on-year, respectively to N$3 600 and N$7 006 as at September 2020, Uusiku pointed out.
Conversely, the 3-bedroom and more-than-3 bedrooms units recorded annual contractions in rent price of 1.5% and 8.2% year-on-year respectively to N$9 937 and N$16 657 at the end of September 2020, he added.
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”, says the market research manager.
Regions
Looking at the regions, growth in rent prices has 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%, followed by Ondangwa -30.3%, Rundu -20.5%, Oshakati -17.0%, and Windhoek -2.0% year-on-year, Uusiku pointed out.
The only towns that have spurred growth in rent prices are Ongwediva and Okahandja with 5.2% and 4.3% year-on-year, respectively, Uusiku added.
Rental yields
Rental yields refer to what the landlord expect as return on an investment property before maintenance fees, tax and other costs are deducted.
Despite a challenging economic environment, rental yields have fared out well in the recent past, settling at 7.8% at the end of September 2020.
“We expect rental yields to remain stable in the short to medium term particularly in the 1-bedroom and 2-bedroom segments on account of unabated housing backlog compounded by a high level of income inequality”, Uusiku said.
Deposit to rent ratio
Overall deposits charged by landlords contracted by 23.8% year-on-year at the end of September 2020 compared to a contraction of 30.8% year-on-year recorded during the same period of 2019.
This was more pronounced in the 2-bedroom and more-than-3-bedrooms segments which contracted by 45.5% and 32.4% year-on-year respectively, compared to contractions of 28.8% and 29.5% year-on-year realized a year ago.
This highlights an oversupply in rental properties on the back of weak tenancy demand and the growing relevance of a multi-family renting culture, he said. [email protected]
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