The national weighted average rent contracted to N$6686 from N$7465 at the end of March 2021, according to the latest FNB Residential Rental Index, which posted an annual contraction of 3.1%.
The 1-bedroom, 2-bedroom and 3-bedroom segments saw annual rental contractions of 0.8%, 2.8% and 1%, reaching N$$3,641, N$6 687 and N$9 636, respectively. The only segment that showed annual growth in rent prices is the more-than-3-bedrooms unit which registered growth of 0.3% to N$17 169.
"These patterns highlight the widespread affordability issues amongst tenants and increased demand for multi-family renting units to support affordability in these economically challenging times", said Frans Uusiku, FNB Market Research Manager.
Uusiku said the incoming economic data for the first quarter of 2021 mirrors the deteriorating state of the rental market, with GDP growth recorded at -6.5% from -2.5% in the corresponding quarter of 2020.
"Suffice to say, a derailed economic recovery, which appears to have been prolonged by the third wave of COVID-19, and low vaccination rate is poised keep the rental market in a "coma" on the back of muted demand. This would have far-reaching implications for the stability of the financial sector, with potential unfavourable consequences such as depressed property sales. While we do not believe we have effectively reached that state yet, some signs are emerging," added Uusiku.
For instance, the real estate and profession activities is amongst the five sectors that carried through the economy in the first quarter of 2021, realizing growth of 4.6%y/y. This is further supported by a considerable growth in home sales seen over the reviewed period. Looking at the regions, Walvis Bay continue to top the list in terms of annual rental contractions with -44.4%, followed by Oshakati (-33.9%), Swakopmund (-28.4%), Ondangwa (-20.7%), Okahandja (-14.4%), Gobabis (-14.2%) and Windhoek (-3.5%). Conversely, rent in Tsumeb, Rundu and Ongwediva grew by 35.8%, 31% and 20.2% y/y, respectively.
These robust growth figures point to a high vacancy rate in the middle market segment across these jurisdictions as affordability issues linger.
"The rental market is an increasingly important pillar for the Namibia property market. However, given the ailing economy and sluggish demand, rent prices are likely to remain muted for the long haul. Meanwhile, the emergence of the multifamily and vacation rental markets appears to have gained prominence particularly in the coastal and central towns," he said.