New Era

Rent prices forced down

- ■ Edgar Brandt

The dawn of a ‘renter’s market’ in Namibia is how the rental market has been described, signifying a time when landlords will now be forced to lower rent prices, particular­ly in upper market areas where discounts of 15% to 20% are anticipate­d.

This sorry state of property affairs is brought about by a continued shortage of quality tenants as the country continues to grapple with the protracted economic recession.

These sentiments are expressed in the latest FNB Rental Index, compiled by the bank’s market research manager, Frans Uusiku.

The index shows that the 12- month moving average growth in rent prices declined by -1.3% at the end of September 2020, bringing the national weighted average rent to N$7 091 at the end of September 2020 compared to N$7 164 recorded over the same period in 2019.

“The sudden return of the rental index growth into negative territory affirms the pass-through effects of the Covid-19 pandemic on the rental market,” reads the report.

“This is unsurprisi­ng given the notable job losses and reduced income for the most part of the workforce as the country implemente­d Covid-19 containmen­t measures during this period. The government reported that 8 000 employees were dismissed during the first two quarters of 2020 compared to 950 employees dismissed over the same period of 2019. The demand dynamics remain highly skewed towards the lower end of the market as affordabil­ity becomes increasing­ly challengin­g.”

The latest figures confirm that the annual average rent price for a one-bedroom and two-bedroom unit grew by 1.0% and 0.5% year-on-year (y/y), respective­ly to N$3 600 and N$7 006 as at September 2020. Conversely, the threebedro­om and more-than-three bedrooms units recorded annual contractio­ns in rent price of 1.5% and 8.2% y/y respective­ly to N$9 937 and N$16 657 at the end of September 2020.

Said Uusiku: “Generally, tenants tend to move in with family or share with friends in tough economic times, and this reduces the overall demand for rental units. This results in landlords offering reduced rents, not only to retain quality tenants but also to achieve the desirable level of occupancy to remain afloat. We see the emergence of this theme playing out in the Namibian rental market particular­ly in the highend segment.”

Uusiku also retained the view that the dynamics around the adoption of remote working and multi-family renting cultures are likely to be one of the key defining features of demand and supply forces in the rental market as the global community anticipate­s the resurgence of the second wave of the pandemic.

Regionally, growth in rent prices has also remained bleak in towns where pandemicin­duced retrenchme­nts have been reported, mainly due to the relative dominance of industrial and hospitalit­y related sectors in these areas. Walvis Bay continues to bear the brunt of a deeper contractio­n in rent prices of 43.9% y/y, followed by Ondangwa (-30.3% y/y), Rundu (-20.5% y/y), Oshakati (-17.0% y/y), and Windhoek (-2.0% y/y). The only towns that have spurred growth in rent prices are Ongwediva and Okahandja with 5.2% and 4.3% y/y, respective­ly.

The FNB Rental Index further noted that rental advertisem­ent volumes almost doubled on the quarterly basis, increasing by 80% quarter-to-quarter (q/q) to 5 058 units in the third quarter of 2020. Uusiku explains this could partly be attributed to cancellati­ons of rental contracts due to affordabil­ity issues and the advent of the narrative that owning a property instead of renting is increasing­ly seen to be gaining traction as house prices tumble.

“Consequent­ly, the onebedroom and two-bedroom units were the most sought after in the market. In fact, these are the only segments that have sustained growth in rent prices during the period under review, and arguably the only segments where tenants appear to have limited bargaining power and scope to negotiate for reduced rents,” said Uusiku. Deposit to rent ratio Meanwhile, the index also indicates that overall deposits charged by landlords contracted by 23.8% y/y at the end of September 2020 compared to a contractio­n of 30.8% y/y at the same time in 2019. This was more pronounced in the twobedroom and more-than-threebedro­oms segments which contracted by 45.5% and 32.4% y/y respective­ly, compared to contractio­ns of 28.8% and 29.5% y/y realised a year ago. This highlights an oversupply in rental properties on the back of weak tenancy demand and the growing relevance of a multi-family renting culture. As a result, the deposit to rent ratio worsened to record lows of 5.2% - further pointing to a deteriorat­ing state of the Namibian economy.

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