Namibia: Windhoek Rent Prices Remain High

RENTS in Windhoek remain high compared to the prevailing situation in the rest of the country.

According to the FNB Namibia Rental Index report, the average rent for a two-bedroomed house in Windhoek was recorded at N$6 674,03, which was, however, a 5% contraction compared to the same period in 2018.

Rehoboth recorded the lowest rental prices, at N$3 000 per month for a 2-bedroomed unit, which is seen as indicative of the smaller population and weaker economic activity at the town, about 100km south of the capital, and consequently thinner volumes in rental transactions compared to Windhoek.

Meanwhile, the rent charges at Walvis Bay recorded the highest growth of 66,7% year-on-year (y-o-y).

According to the report, other towns where rent growth was in positive territory include Ongwediva at 9,1% y-o-y, Okahandja at 3% y-o-y and Ondangwa at 1,5% y-o-y.

FNB group economist Ruusa Nandago said the report is based on average advertised prices for the residential property market across the country.

She said the FNB Rent Price Index recorded a contraction of 1,9% at the end of September 2019, compared to a contraction of 8,6% over the same period in 2018.

"The smaller contraction was once again supported by price pressures in the 3-bedroom and above segment whose growth stood at 9% y-o-y compared to a contraction of 9,4% at the end of September 2018. In addition, pressures continue to build in the 1, 2 and 3-bedroom segments which have resulted in smaller year-on-year contractions of 4%, 3,2% and 3,4%, respectively," she said.

The national rent charges during the review period stood at N$7 163,94 per month, as the market remains overall negative owing to the persistent weak domestic economy.

Nandago stated that the erosion in rental prices, which started early 2018, is due to the recessionary environment that seems to be gradually reversing.

Meanwhile, the average monthly rent for a 1-bedroom unit is N$3 436, while a 2-bedroom unit rents for N$6 890. However, a 3-bedroom unit now costs an average of N$9 705 while those units with more than 3-bedrooms can be rented out for up to N$21 029 a month.

Overall, the average rent price per room at the end of September was recorded at N$3 515.79, a 2,7% rise y-o-y compared to a contraction of 9,6% recorded in July 2018.

"When looking at shares of total rental activity, 39,4% of all activity took place in the 1-bedroom segment, followed by the 2-bedroom segment which accounts for 36,7% of all transactions and the 3-bedroom segment whose share was 20,6%. The 3-bedroom and above segment accounted for 3,3% of all rental activity."

DEPOSITS

According to the FNB group economist, deposits charged continue to drop with the trend at the end of September 2019, recording a contraction of 30,8% y-o-y compared to 13,8% y-o-y in September 2018.

This is the lowest reading recorded since 2017 with contractions in deposit growth rates observed across all rental index segments.

Furthermore, the deposit-to-rent ratio has continued to plummit and now stands at 6,8%, the lowest the ratio has been since April 2010.

Nandago said: "We maintain our view that Namibia has moved to a renter's market, allowing potential tenants to negotiate lower rental deposits or no deposit charges at all."

HOUSING PRICES

Nandago added that the housing market remains under pressure with very low levels of buying and selling activities resulting in houses staying on the property market an average of 31 weeks before they are eventually sold.

"We thus maintain our earlier view that rent affordability has not necessarily improved, but rather that rental property prices will be buoyed by an increasing number of participants opting to move into the rental market in the face of affordability issues in the housing market.

"This will likely continue to push up prices and lead to smaller year-on-year contractions in growth. We expect rental price growth to remain in contraction for the remainder of the year and to move into positive territory early next year, likely settling in the range of 1%-2%."

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