14 September 2021 | Wirtschaft

Rental market showing signs of recovery

The national weighted average rent has returned to its pre-Covid-19 levels of N$6 991, coming in at N$7 003 at the end of June 2021.

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. Frans Uusiku, Market Research Manager: FNB

PHILLEPUS UUSIKU

Despite the First National Bank (FNB) rental index registering an annual contraction of 2.3% at the end of June 2021, it is showing signs of recovery.

For the period under review, two out of four rental segments posted positive growth, while at the end of March 2021, only one segment registered positive growth.

According to FNB’s market research manager, Frans Uusiku, the moderate improvement in the rental index highlights a gradual recovery in rental occupancy rates and economic activity in general. Rental growth was specifically evident within the one-bedroom and more-than-three-bedrooms 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 two-bedroom and three-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. For context, the two-bedroom accounted for the highest share of overall rental listings of 46% in the second quarter, followed by the one-bedroom (32%), 3-bedroom (17%) and the more-than-3-bedrooms (5%).

Given these developments, the national weighted average rent has returned to its pre-Covid-19 levels of N$6 991, coming in at N$7 003 at the end of June 2021 from N$6 886 and N$7 022 recorded in March 2021 and June 2020, respectively, Uusiku pointed out.

Towns

Green shoots in rental growth were mostly observed across the northern towns, such as Rundu (52.6%), Ongwediva (18.0%) and Oshakati (1.3%) year-on-year.

Rehoboth also saw an annual rental growth of 23.7%. In effect, Rehoboth has consistently maintained a positive growth trajectory in rent prices. This is not surprising given the perceived high rental occupancy in that jurisdiction.

The worst 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 (-16.8%) year-on-year. Furthermore, Okahandja recorded rental contraction of 23.1% followed by Gobabis and Windhoek with -14.2% and -2.1% year-on-year, respectively, Uusiku pointed out.

The total amount of rental transactions recorded for the second quarter of 2021 contracted by 27.6% quarter-on-quarter and 27.9% year-on-year, reaching a record low of 2 024 units. The two-bedroom segment continues to dominate the rental unit mix. This is expected as this segment is generally cost-effective for tenants and ideal for most demographics. However, the two- bedroom tenant base also tends to be transient, thus creating a high tenant turnover. As housing affordability remains an issue, it is with no doubt evident that Namibia is increasingly becoming a renter nation, Uusiku added.

Rental yields

Annual average rental yields slowed to 6.8% at the end of June 2021 from 7.9% a year ago. The much-anticipated implementation of the Rent Control Bill has been on the table for quite some time despite being finalized in 2018. Once promulgated into law, it intends to regulate the letting and hiring of non-commercial properties in areas where rent boards have been established. According to the Harambee Prosperity Plan (HPP) report for the first quarter, the Rent Control Bill should be submitted before parliament for debate and subsequent promulgation by December 2021.

“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, Uusiku said.

The country needs to vaccinate many people and as quickly as possible to avoid further Covid-19 waves from damaging the economy and consequently the rental market. As of 8 September, about 329 000 Namibians have received Covid-19 doses and only 116 000 are fully vaccinated which translates to about 4.6% of the population. This is far below the 60% herd immunity target set by the government. 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, he said.