While prices for one-bedroom rental units have increased since last year, prices for two and more bedroom units continue to contract due to waning demand. This is according to the latest FNB Residential Rental Index which posted an annual contraction of 2.1% at the end of December 2020, from -0.8% recorded in December 2019.
This brings the national weighted average rent to N$6 747 at the end of December 2020, compared to N$6 991 recorded over the same period in 2019. The rent price for a one-bedroom unit averaged N$$3 670 on an annual basis and spurred growth of 4.9% year-on-year (y/y) from -6.5% y/y recorded a year ago. Affordability within the two-bedroom, three-bedroom and more-than-three-bedroom units, on the other hand, continues to be on an uphill path, with annual rent prices recording contractions of 2.3%, 5.0% and 3.4% y/y to N$6 882, N$9 728 and N$17 121, respectively.
“We view the prevailing fundamentals in the rental market to be permeated by three key themes. Firstly, the deteriorating demand for higher-priced properties means that landlords are seemingly left with little choice but to curb their expectations when setting their asking price.
Secondly, many short-term and leisure rental properties moved onto the long-term rental market in 2020, after a sharp decline in tourism activity potentially due to Covid-19 induced travel restrictions.
Lastly, we are also starting to see a growing interest amongst tenants choosing to take advantage of lower interest rates to buy houses, whilst some are opting to move in with families, mainly due to job losses and/or reduced income.
This exit of tenants from the rental market means an additional oversupply of rental properties to the already overstocked pool, thereby exerting further downward pressure on the rental prices,” explained Frans Uusiku, FNB Market Research Manager.
Regionally, Walvis Bay continues to bear the brunt of rental contractions, recorded at -42.2% y/y followed by Oshakati (-30.9 y/y), Ondangwa (26.8% y/y), Rundu (-20.2%), Swakopmund (-16.7% y/y), Okahandja (-5.8% y/y) and Windhoek (-2.1% y/y). Conversely, Tsumeb recorded the highest growth in rent prices of 35.8%y/y followed by Ongwediva with 15.2% y/y over the review period.
Affordability remains an important consideration for the consumer in general, but more specifically amongst tenants. “We expect rental growth to remain muted for some time, especially across the multi-bedroom segments. The high rental turnover is expected to be a recurrent theme in the wake of weak economic conditions and dominant supplies of rental properties in the market. Furthermore, whilst the expected promulgation of the Rent Control Bill by 2021 as outlined in the Harambee Prosperity Plan II is a welcomed development particularly when viewed from a long-term perspective, this is nonetheless poised to keep the already depressed rent prices at bay,” Uusiku added.