Namibians feel the pinch as rental prices skyrocket

First National Bank Namibia (FNB) says rental prices in the country continue to increase beyond the means of many.

In their latest rent price index, FNB said the rental market has been witnessing increases in prices in the past three consecutive quarters. This comes after reasonably lower prices were experienced from March 2023.

The index noted that prices reached a 12-month average of 7,2% in the fourth quarter of 2023. This was up from 4,7% in the third quarter of 2023, and a negative 2,1% in the fourth quarter of 2022.

“This is the highest growth observed since 7,7% in December 2017. The average rent price on a 12-month rolling basis stands at N$7 257,” noted the statement, adding that the arrival of expats for oil and gas exploration activities could potentially be impacting the rental market.

When considering bedroom size, the three-bedroom segment recorded the highest growth at 19,1%, while the one- two- and more than three-bedroom segments recorded muted growth of 0,6%, -0,3% and 0,0%, respectively.

“Average rent prices are N$3 579, N$5 833, N$11 155 and N$21 294 for the one, two, three and more than three-bedroom segments, respectively,” said FNB.

The average deposit growth in the fourth quarter of 2023 stood at 14,1%, below the revised 15,3% in the third quarter of 2023, while still above the 2,2% contraction in the fourth quarter of 2022.

“We note that deposit growth has remained in double digit territory since June 2023, which suggests that landlords are in a better position to charge higher deposits due to increased demand.

“We maintain our view that the dynamics in the rental market are not in line with what would be expected in a high price and elevated interest rate environment which would weigh on affordability,” said the FNB researchers.

They attributed the higher demand for rent to the fact that mortgages are unaffordable in the current high interest rate environment and consumers are opting to rent for longer, thereby, enabling landlords to pass on higher rental prices and deposits with prospective tenants.

Additionally, the significant decline in house price transaction volumes (-19,1% in the fourth quarter of 2023) corroborates this view. These dynamics may explain why the resilience is mostly observed in the three-bedroom segment, rather than in the lower bedroom segments.

“We continue to monitor potential impacts from adjustments in the loan-to-value ratios, which became effective on 31 October 2023, which might incentivise investments in residential property, thereby increasing the supply of rental property,” said the researchers.

Looking forward, they expect the rental market to continue this positive trajectory as a slight uptick in inflation is expected due to the recent fuel hikes and global tensions. The repo rate remains at its peak of 7,75% with a high possibility that the cutting cycle is pushed further beyond the fourth quarter of 2024.

* email: matthew@namibian.com.na