WINDHOEK - The FNB Rental Index, which tracks advertised rental prices across the country, recorded a slower contraction of 3.0 percent year-on-year at the end of May 2019. This contraction, the slowest recorded since March 2018, comes on the back of a 0.6 percent year-on-year price growth in the one-bedroom segment. Contractions of 3.0 percent year-on-year, 3.8 percent year-on-year and 4.5 percent year-on-year in the two, three, and three+ bedroom segments, however, contained any further acceleration in prices. The overall national mean rent price now stands at N$7 387 compared to N$7 346 a year ago.
The growth in deposits charged has not reversed the downward trend that started in August 2018. The average deposit charged at the end of May contracted sharply by 22.0 percent year-on-year compared to a contraction of 11.8 percent recorded in March. While deposits charged in the more than three-bedroom segment remain positive at 2.0 percent year-on-year, this was counteracted by significant contractions in the deposits charged in the one, two and three-bedroom segments of 15.4 percent, 25.3 percent and 28.5 percent respectively.
Ruusa Nandago, Market Research Manager at FirstRand Namibia, explained: “This severe contraction clearly illustrates the willingness by landlords to bargain downwards on deposit levels to attract and secure tenants. This is further substantiated by the growth in the deposit-to-rent ratio which has slowed down to 8.1 percent, the lowest recorded since August 2011. Lower charges of rental deposits are archetypal of fragile economic conditions and strained consumer demand for rental units, which puts landlords under immense pressure.”
“The weaker contraction in rent prices corroborates our earlier suggestion that the rental prices seem to be showing signs of bottoming out. However, with a slew of real sector data pointing towards immense pressure on the economy, consumer confidence and disposable incomes, we expect any recovery in prices to be a slow and gradual process. Furthermore, the smaller contraction was driven solely by an increase in prices in the one-bedroom segment and not across all segments. The increase in this segment is likely a direct consequence of weak affordability in the housing market which has resulted in consumers moving into the rental space. This is validated by data showing slowing extension of mortgage loans to households. As growth concerns persist, we expect rental prices across the country to remain in the red and for recovery in the market to occur at a slow pace,” concluded Nandago.