Rental prices slip back into negative territory
The 12-month average growth in rent prices took a dip of -1.3% at the end of September 2020, indicating that the sudden return of the rental index growth into negative territory affirms the pass-through effects of COVID-19 pandemic on the rental market.
This is according to the latest FNB Residential Rental Index, which shows that the national weighted average rent to N$7 091, compared to N$7 164 recorded over the same period in 2019.
“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” said Frans Uusiku, FNB Market Researcher.
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.
In effect, the annual average rent price for a 1-bedroom and 2-bedroom unit grew by 1% and 0.5% year on year, respectively to N$3 600 and N$7 006 as at September, while 3-bedroom and more-than-3 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.
“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 high-end segment” added Uusiku.
In the regions, growth in rent prices has remained bleak in towns where COVID-19 induced retrenchments have been reported, mainly due to the relative dominance of industrial and hospitality related sectors.
More specifically, 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% y/y), and Windhoek (-2% 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.
Looking ahead, Uusiku said the shortage of quality tenants is likely to remain an issue as the economy continues to grapple with the protracted economic recession, signifying the dawn of a renter’s market, one that would compel landlords to offer competitive rates, especially in the upper market areas. That is to say, offering a discount of between 15% – 20% of the advertised rent.
“Meanwhile, we retain our 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 COVID-19 pandemic” said Uusiku.
Frans Uusiku, FNB Market Researcher.