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Rental market back to pre-Covid-19 averages

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DEMAND fundamentals around the residential rental market which has largely been permeated by the Covid-19 pandemic appear to have started to cool off.

This follows the FNB Residential Rental Index posting an annual contraction of 2,3% at the end of June 2021 from the negative 3,7% recorded at the end March.

At the end of June, the national weighted average rent has returned to its pre-Covid-19 levels coming in at N$7 003 at the end of June 2021.

In June 2020, it was averaging at N$7 022. In March this year though, there was still some sort of recovery as the average settled at N$6 886.

According to FNB Namibia’s marketing manager, Frans Uusiku, this moderate improvement in the rental index highlights a gradual recovery in rental occupancy rates and economic activity in general.

Uusiku said rental growth was specifically evident within the 1-bedroom and more-than-3-bedroom segments, which grew by 2,2% and 2,9% year-on-year to N$3 634 and N$18 129 respectively.

On the other hand, the 2-bedroom and 3-bedroom segments continue to suffer from a large supply overhang, resulting in rental contractions of 5,8% and 4,2% year-on-year to N$6 612 and N$9 615 at the end of June 2021, respectively.

The 2-bedroom accounted for the highest share of overall rental listings of 46% in the second quarter, followed by the 1-bedroom (32%), 3-bedroom (17%) and the more-than-3-bedrooms (5%).

From a regional perspective, green shoots in annual rental growth were mostly observed across the northern towns, such as Rundu (52,6%), Ongwediva (18%) and Oshakati (1,3%).

Rehoboth also saw an annual rental growth of 23,7%.

Uusiku said Rehoboth has consistently maintained a positive growth trajectory in rent prices, and it is not surprising given the perceived high rental occupancy in that jurisdiction.

The worst annual declines in rent prices were recorded in towns that are mostly dominated by the leisure market.

These include Swakopmund (30,8%), Arandis (28,9%), and Walvis Bay (6,8%). Furthermore, Okahandja recorded rental contraction of 23,1% followed by Gobabis and Windhoek with 14,2% and 2,1%, respectively.

The FNB manager said although the rental index is starting to show some signs of recovery from the Covid-19 associated economic impact, we are not out of the woods yet.

According to him, vaccination is key.

“The country needs to vaccinate as many people as quickly as possible to avoid further Covid-19 waves from damaging the economy and consequently the rental market,” he said.

On rent control, Uusiku said the implementation of the rent control bill also presents downside risks to affordability for tenants.

“Given that the ceiling is set at 10% and the market determined rental yields are at 6,8%, this gives room for landlords to push prices higher, thus putting the tenants under pressure.”

Email: [email protected]

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