Rental prices rebound

Staff Writer

The FNB Rental Index for the first quarter of 2020 shows that overall residential rent prices rebounded from a two-year negative growth territory.

Frans Uusiku, FNB Market Research Manager said the Covid-19 lockdown is bound to paint a different picture when looking at quarter two of 2020.

“Although we reached a 12-month average growth of 0.0 percent at the end of March, bringing the national monthly average rent price to N$ 7465, we know that the pandemic has disrupted business activity, resulting in job losses and reduced income for the most part of the labour force. This is bound to have a devastating effect on tenants and landlord cash flow going forward. We expect the rental market to hit a growth plateau in the second quarter before it reverts back to negative growth territory.”

Uusiku notes that when looking at the first quarter of 2020, the FNB Rental Index states that the listed rental units were largely concentrated in the 1-bedroom and 2-bedroom segments, accounting for 43 percent and 32 percent of the overall listings, respectively.

Uusiku adds that these rental units were only recorded in Windhoek where the rural-urban migration is relatively high compared to other towns.

“This observation continues to affirm the existing imbalance between the demand and supply dynamics in the housing market, particularly in the medium to higher-end of the market. The overall improvement in the rental index was driven mainly by the 2-bedroom and more-than-3 bedrooms segments, which grew by 3 percent and 2 percent y/y, respectively.”

According to the report, growth in deposits charged by landlords contracted by 32.1 percent y/y at the end of March 2020 compared to a growth of 11.8 percent y/y recorded during the same period of 2019.

“This brought the deposit to rent ratio to a 10-year record low of 5.8 percent. The last time Namibia experienced such a low deposit to rent-ratio was in 2009 during the global financial crisis. The contraction was notable across all the four rental segments with the 1, 2, and 3-bedroom units contracting by 22.4 percent, 39.8 percent and 33.2 percent y/y respectively, while the more-than-3 bedrooms segment contracted by 28.1 percent y/y at the end of March 2020. This implies that upfront tenancy deposit is becoming less of a requirement due to stifling economic conditions.”

On the topic of rental yields, Uusiku stated that on an annual basis, rental yields edged up by 0.3 percentage points to 7.8%y/y at the end of March 2020.

“This is consistent with the observed improvement in the overall rental index growth and continues to paint a lucrative picture of the Namibian rental market. Furthermore, it points to the fact that rent prices are growing at a relatively fast pace compared to growth in the house prices.”

Uusiku said that the residential rental market had nearly evaded the negative growth territory, recording a 12-month average growth of 0.0 percent at the end of March 2020 compared to a contraction of 5.2 percent y/y recorded over the same period of 2019.

He added that this was likely to be reversed by the COVID-19 pandemic and the associated implementation of nation-wide lockdown effective 28 March 2020.

“While the impact of the COVID crisis and lockdown is not yet reflected in the data, the stark reality is likely to be reflected in the second quarter with a potential growth reversal in rent prices expected, as landlords may be forced to negotiate for discounted rent to remain afloat. Although evictions are currently banned during the lockdown, tenants whose livelihoods are directly affected by the COVID-19 pandemic and lockdown will have limited or no income to pay up rent for the remainder of the lockdown period. All in all, the advent of this pandemic serves as a stark reminder to households and businesses to shore up their emergency funds to ensure that they are better prepared to survive unexpected future events.”

Related Posts