Rental Index records a slower contraction of 3% y/y in May
The FNB Rental Index, that tracks advertised rental prices across the country, recorded a slower contraction of 3% y/y at the end of May 2019.
This contraction, the slowest recorded since March 2018, comes on the back of a 0.6% y/y price growth in the 1-bedroom segment.
Contractions of 3% y/y, 3.8% y/y and 4.5% y/y in the 2, 3, and 3+ bedroom segments, however, contained any further acceleration in prices. The overall national mean rent price now stands at N$7387 compared to N$7346 a year ago.
The growth in deposits charged has not reversed the downward trend that started in August 2018. The average deposit charged at the end of May contracted sharply by 22% y/y compared to a contraction of 11.8% recorded in March.
While deposits charged in the more than 3 bedrooms segment remain positive at 2% y/y, this was counteracted by significant contractions in the deposits charged in the 1, 2- and 3-bedroom segments of 15.4%, 25.3% and 28.5% respectively.
Ruusa Nandago, Market Research Manager at FirstRand Namibia explain ed the trend.
“This severe contraction clearly illustrates the willingness by landlords to bargain downwards on deposit levels to attract and secure tenants. This is further substantiated by the growth in the deposit-to-rent ratio which has slowed down to 8.1%, the lowest recorded since August 2011. Lower charges of rental deposits are archetypal of fragile economic conditions and strained consumer demand for rental units, which puts landlords under immense pressure,” she said.
According to her the weaker contraction in rent prices corroborates the earlier suggestion that the rental prices seem to be showing signs of bottoming out.
“However, with a slew of real sector data pointing towards immense pressure on the economy, consumer confidence and disposable incomes, we expect any recovery in prices to be a slow and gradual process,” she added.
Furthermore, she said the smaller contraction was driven solely by an increase in prices in the 1-bedroom segment and not across all segments.
“The increase in this segment is likely a direct consequence of weak affordability in the housing market which has resulted in consumers moving into the rental space. This is validated by data showing slowing extension of mortgage loans to households. As growth concerns persist, we expect rental prices across the country to remain in the red and for recovery in the market to occur at a slow pace,” concluded Nandago.