Weak economy sparks drop in rental prices
Group Economist at FirstRand Namibia, Daniel Kavishe, said rental prices seemed to have started their decline as early as the first quarter of 2017 with current prices suggesting that the market is bottoming out.
FNB Rental Price Index, the leading indicator on rental prices in Namibia, shows that growth has been stymied by sluggish economic conditions – specifically weak disposable income that has been a systemic problem of the current recession. For March 2019, the index shows a negative territory at -5.2%.
According to the Index, in Windhoek, a three-bedroom property rents for N$10,695 per month, while a two-bedroom property rents for N$7,023 per month and the average price for a single room unit is currently N$3,620 per month.
Moreover, across the country, the Index shows that stark ranges exist in terms of rental prices. Coastal town prices are but an example of these idiosyncratic differences with prices at Walvis Bay (on average) coming in 9.3% lower than Swakopmund yet 55.6% higher than Henties Bay. 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 four to five thousand Namibian dollars.
Kavishe added that the standard practice of requesting deposits from renters as a gauge of affordability and commitment has loosened in the market, noting that an average deposit charged contracted by 11.8% at the end of March 2019.
“A better indication from the market, however, is the deposit-to-rent ratio which serves as a good measure of demand at a given point in time with the assumption that a higher deposit to rent ratio denotes higher demand. The latest indicator shows that the ratio has tapered to 8.5%y/y with the highest growth in the series experienced in 2015 when growth was 27.4%y/y,” Kavishe said.
Kavishe further added that the Rent Bill may be problematic to implement and may not meet the needs of the current market, specifically given the current economic slowdown.
“Based on current data, rental yields are much lower than the proposed ceiling which would mean that the landlord would have room to push prices higher if the bill is instated in its current form,” Kavishe said.