Demand fundamentals around the residential rental market, which have largely been permeated by the Covid‐19 pandemic, appear to have started to cool-off. The FNB Residential Rental Index posted an annual contraction of 2.3% at the end of June 2021 from the -3.7% recorded at the end of the preceding quarter.
“The national weighted average rent has returned to its pre-Covid-19 levels of N$6 991, coming in at N$7 003 at the end of June 2021 from N$6 886 and N$7 022 recorded in March 2021 and June 2020, respectively. The moderate improvement in the rental index highlights a gradual recovery in rental occupancy rates and economic activity in general,” said Frans Uusiku, FNB Namibia Market Research Manager.
The latest figures from the rental index shows that rental growth was specifically evident within the one bedroom and more than three bedrooms segments, which grew by 2.2% and 2.9% year-on-year (y/y) to N$3 634 and N$18 129 respectively. On the other hand, the two bedroom and three bedroom segments continue to suffer from a large supply overhang, resulting in rental contractions of 5.8% and 4.2% y/y to N$6 612 and N$9 615 at the end of June 2021, respectively. For context, the two bedrooms accounted for the highest share of overall rental listings of 46% in the second quarter, followed by the one bedroom (32%), 3-bedroom (17%) and the more than three bedrooms (5%).
Uusiku noted that from a regional perspective, green shoots in rental growth were mostly observed across the northern towns, such as Rundu (52.6% y/y), Ongwediva (18.0% y/y) and Oshakati (1.3% y/y). Rehoboth also saw an annual rental growth of 23.7%. In effect, Rehoboth has consistently maintained a positive growth trajectory in rent prices. This is not surprising given the perceived high rental occupancy in that jurisdiction. The worst declines in rent prices were recorded in towns that are mostly dominated by the leisure market. These include Swakopmund (-30.8% y/y), Arandis (-28.9% y/y), and Walvis Bay (-16.8% y/y). Furthermore, Okahandja recorded rental contraction of 23.1% followed by Gobabis and Windhoek with -14.2% and -2.1% y/y, respectively.
“Although the rental index is starting to show some signs of recovery from the Covid-19 associated economic impact, we are not out of the woods yet. The country needs to vaccinate as many people as quickly as possible to avoid further Covid‐19 waves from damaging the economy and consequently the rental market. As of 8 September, about 329 000 Namibians have received Covid-19 doses and only 116 000 are fully vaccinated which translates to about 4.6% of the population. This is far below the 60% herd immunity target set by the government. The implementation of the Rent Control Bill also presents downside risks to affordability for tenants. Given that the ceiling is set at 10% and the market determined rental yields are at 6.8%, this gives room for landlords to push prices higher, thus putting the tenants under pressure,” Uusiku added.