WINDHOEK – Namibia’s overall rental prices per square meter have increased steadily year after year despite the fact that the sizes of properties rented have continued to decrease across the country. This, said Daniel Kavishe, FNB Namibia’s Group Economist, is a common trend in developed countries where land availability is constrained. Kavishe made the observation yesterday at the launch of FNB Namibia’s Rental Index which serves as a leading indicator of Namibia’s overall rental prices and their trajectories.
Kavishe and his team started tracking advertised rental prices about two years ago and he noted that the Rental Index ended March 2019 in negative territory at -5.2 percent. “The index growth has been stymied by sluggish economic conditions, specifically weak disposable income that has been a systematic problem of the current recession,” Kavishe stated.
The FNB Rental Index indicates that rental prices have dropped across various segments with one, two and three bedroom apartments declining by -1.7 percent, -4.6 percent and -5.7 percent respectively. According to a report on the index, prices seemed to have started the decline as early as the first quarter of 2017 with current prices suggesting that the market is bottoming out. This development should bode well for new renters who can now negotiate better rental prices.
The FNB Rental Index further shows that an average three bedroom property rents for close to N$10 700 per month, while a two bedroom place will go for just over N$7000 per month. The average prices for a single room unit is currently N$3620 per month. Kavishe noted that, interestingly, three bedroom properties use to be on average more than N$11 000, which shows mounting pressure in that specific domain. Properties with more than three bedrooms averaged over N$18 000 per month as the end of March 2019.
Meanwhile, the index indicates that the rental market in Otjiwarongo and Tsumeb seems to be one of the lowest advertised within the past year while the northern towns of Ongwediva, Oshakati and Ondangwa tend to have prices ranging between N$4000 and N$5000.
“The calculated rent per room value decreased N$3783 to N$3581 over the past year. Implicitly, it appears that the growth in the calculated rent per room value has passed its inflection point, contracting by -5.3 percent year-on-year compared to the largest contraction recorded of -11.6 percent year-on-year in June 2018. This is a crucial figure given the rise of charges per room versus a traditional house or apartment,” reads the report on the Rental Index.
However, the Rental Index picked up stark changes across the country in terms of rental prices. For instance, coastal town prices at Walvis Bay came in at 9.3 percent lower than Swakopmund but 55.6 percent higher than in Henties Bay.
In addition, as a result of lower property prices and subsequently lower rent charged, rental yields continue to wane in terms of investment.
Under normal circumstances, declining property prices would push consumers to rent, resulting in higher average rent, ergo higher yield. However, with disposable income declining, the index shows that overall prices have muted resulting in yields dropping to 7.4 percent year-on-year at the end of March 2019.
“Traditionally, the rental yield has served as a proxy for investment and according to our data Rundu offers the highest yields followed by Walvis Bay and Swakopmund. Windhoek’s rental yield is below the overall national level coming in at 5.5 percent at the end of 2018.
Henties Bay, Tsumeb and Outapi have some have some of the lowest rental yields nationally, implying relative poor rental market environments from an investor perspective,” Kavishe pointed out.