Local rental index growth remains static
Although rental markets across most advanced economies are on a path of recovery due to the resumption of “normal life”, improved pace of Covid-19 vaccination and job growth, these dynamics remain farfetched in the Namibian market context. More specifically, demand fundamentals remain relatively weak in the local economy.
This is evident in the FNB Residential Rental Index which has retained an annual contraction of 2.3% at the end of September 2021 from the preceding quarter, which is still worse than the -1.3% seen in September of last year.
Meanwhile, the national weighted average rent came in at N$6,790 at the end of September 2021 from N$7,061 a year ago. “The continued deterioration of the residential rental market also appears to highlight easing competition pressure within the single-family market due to limited inventory of affordable housing. This is particularly true for the central region. Most notably, the 2-bedroom and 1-bedroom segments recorded the largest rental contraction of 1.5% and 1.1% y/y, to N$6,512 and N$3,583, respectively” said Frans Uusiku, FNB Market Research Manager.
A closer look at the central region shows that Windhoek is the biggest residential rental market, accounting for 92.0% of rental listings year-to-date.
This, nonetheless, reflects a marginal decrease from 92.4% and 95.0% in 2020 and 2019, respectively – which in our view explains the rising prominence of the coastal and northern regions as potential jurisdictions for holiday homes. The 12-month average rent in Windhoek contracted by 5.0% y/y and 2.2% q/q to N$6,700 at the end of September 2021. “Even so, this remains the smallest contraction observed in rents across the towns under review. However, some suburbs in Windhoek have seen real pressure on the supply of rental properties, especially during the pandemic. This could be due to the emergence of semigration or some households opting to work from other towns as organisations adopt flexible working arrangements” he adds.
“The recovery of the residential rental market appears to have flatlined, with the sector now characterised by weak demand, increased vacancies and negative rental growth across the board.
“Cyclical forces such as weak demand fundamentals are believed to be at the centre of these dynamics. According to the second quarterly report by the Ministry of Labour, Industrial Relations and Employment Creation for 2021, the industry is still seized with an unpleasant number of retrenchments. During the said Quarter, the Ministry received notices of intent to dismiss a total of 881 employees by 117 employers. This reflects an increase of 58% and 55% q/q in respect of employees and employers, respectively” concluded Uusiku.