FNB Rental Index continues to paint a bleak future – only 1-bedroom units remain popular
“We expect rental growth to remain muted for some time especially across the multi-bedroom segments. The high rental turnover is expected to be a recurrent theme in the wake of weak economic conditions and dominant supplies of rental properties in the market,” said FNB Market Research Manager, Frans Usiku when releasing the latest Residential Rental Index.
The index continued its downward trend, posting an annual contraction of 2.1% for calendar year 2020, following the -0.8% contraction recorded the previous year.
“We view the prevailing fundamentals in the rental market to be permeated by three key themes. Firstly, the deteriorating demand for higher-priced properties means that landlords are seemingly left with little choice but to curb their expectations when setting their asking price.”
“Secondly, many short-term and leisure rental properties moved onto the long-term rental market in 2020, after a sharp decline in tourism activity potentially due to COVID-19 induced travel restrictions.”
“Lastly, we are also starting to see a growing interest amongst tenants choosing to take advantage of lower interest rates to buy houses, whilst some are opting to move in with families, mainly due to job losses and/or reduced income. This exit of tenants from the rental market means an additional oversupply of rental properties to the already overstocked pool, thereby exerting further downward pressure on the rental price,” stated Usiku.
At the end of December, the national weighted average rent stood at N$6,747 compared to N$6,991 in 2019. The rent for a 1-bedroom unit has averaged N$$3,670 on an annual basis and spurred growth of 4.9%y/y from -6.5% y/y recorded a year ago. The 2-bedroom, 3-bedroom and more-than-3-bedrooms units recorded contractions of 2.3%, 5% and 3.4% year on year to N$6,882, N$9,728 and N$17,121, respectively.
For the 2020 calendar year, rent contracted the most in Walvis Bay, by -42.2% followed by Oshakati (-30.9), Ondangwa (-26.8%), Rundu (-20.2%), Swakopmund (-16.7%), Okahandja (-5.8%) and Windhoek (-2.1%)
The index’s highest growth was recorded in Tsumeb (35.8%) and Ongwediva (15.2%).