The recovery of the rental market flatlined

The national weighted average rent came in at N$6 790 at the end of September 2021 from N$7,061 a year ago.

01 December 2021 | Economics

Given the estimated average net monthly salary of N$17 400 in Namibia, rent affordability remains an issue on the back of subdued labour market, with rent-to-income ratio estimated at 39%. Frans Uusiku, market research manager: FNB

PHILLEPUS UUSIKU

Although rental markets across most advanced economies are on a path of recovery due to the resumption of “normal life”, improved pace of Covid-19 vaccination and job growth, these dynamics remain far-fetched in the Namibian market context.

The recovery of the residential rental market appears to have flatlined, with the sector now characterised by weak demand, increased vacancies and negative rental growth across the board.

According to Frans Uusiku, First National Bank (FNB’s) market research manager, the twelve-month average rental index growth has remained flat at -2.3% from the last quarter, which is still worse than the -1.3% seen in September of last year.

The national weighted average rent came in at N$6 790 at the end of September 2021 from N$7 061 a year ago.

The continued deterioration of the residential rental market also appears to highlight easing competition pressure within the single-family market due to limited inventory of affordable housing.

Most notably, the two-bedroom and one-bedroom segments recorded the largest rental contraction of 1.5% and 1.1% year-on-year, to N$6 512 and N$3 583, respectively, Uusiku pointed out.

Windhoek

A closer look at the central region shows that Windhoek is the biggest residential rental market, accounting for 92.0% of rental listings year-to-date.

The 12-month average rent in Windhoek contracted by 5.0% year-on-year and 2.2% quarter-on-quarter to N$6 700 at the end of September 2021.

Even so, this remains the smallest contraction observed in rents across the towns under review. However, some suburbs in Windhoek have seen real pressure on the supply of rental properties, especially during the pandemic, he said.

The top five suburbs with the largest rental contractions are Auasblick (-64.2% to N$12 011), Windhoek West (-20.9% to N$5 376), Katutura (-19.5%% to N$3 296), Ludwigsdorf (-14.2% to N$N$12 595), and Hochland Park (-13.0% to N$6 644), year-on-year, Uusiku pointed out.

The top five suburbs with the highest rental growth are Windhoek North (18.9% to N$6 706), Olympia (17.1% to N$14 286), Klein Kuppe (16.2% to N$11 471), Klein Windhoek (9.0% to N$12 270) and Elisenheim (3.4% to N$N$7 878), year-on-year.

Given the estimated average net monthly salary of N$17 400 in Namibia, rent affordability remains an issue on the back of subdued labour market, with rent-to-income ratio estimated at 39%, the marker research manager said.

Investment

The question around whether the property market is still regarded as a secure investment class under the current economic conditions has been a recurring theme.

This is indeed expected as rental yields have been on the downward trend since the beginning of 2020, reaching 6.9% in September 2021. While it should be noted that one asset class should not be seen as a replacement for, or as an alternative to another, rental yields in Namibia are still competitive by regional comparison and are 3.3 percentage points higher than the prevailing inflation in Namibia, he added.

Meanwhile, the Rent Control Bill is expected to be submitted to Cabinet in December 2021 for subsequent tabling in Parliament.

Overall, deposits charged by landlords contracted by 26.1% year-on-year at the end of September 2021 compared to a contraction 23.8% year-on-year a year ago.

The more-than three bedrooms segment recorded the deepest contraction of 34.0% year-on-year in deposit charged, followed by the three-bedroom, one-bedroom and two-bedroom segments, with -29.8%, -20.8% and -18.7%, respectively, Uusiku [email protected]

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