FNB Namibia has found that the country’s rental market remains robust, with individuals postponing property purchases and opting for prolonged rentals due to an elevated interest rate environment and affordability constraints in the first three quarters of 2023.
FNB Namibia Economist Ruusa Nandago says the significant decline in house price transaction volumes by 27.7% in the third quarter of 2023 corroborates this view.
“The decision by individuals to delay the purchasing of properties and rent for longer will continue to support the rental market. These dynamics may explain why the resilience is mostly observed in the three-bedroom and more than three-bedroom segments, rather than in the lower bedroom segments. Moving forward, we expect the rental market to remain fairly stable as inflation starts to moderate and the repo rate remains at its peak of 7.75% with a shallow cutting cycle through to 2026,” she said.
Nandago further noted that the adjustments in the loan-to-value ratios, which became effective on 31 October 2023, might incentivise investments in residential property, thereby increasing the supply of rental property.
This comes after moving out of contractionary territory in March 2023, the FNB Rent Price Index remained positive for two consecutive quarters, reaching a 12-month average of 4.7% in Q3-2023 from 5.8% in Q2-2023 and 0.1% in Q3-2022.
FNB in the Rent Price Index Report highlights that the average rent price on a 12-month rolling basis stood at N$7,177.
“When considering bedroom size, the three bedroom and more than three-bedroom segments grew by 4.0% and 9.2% respectively, while the one and two-bedroom segments contracted by 4.6% and 9.0% during Q3-2023,” Nandago said.
She noted that during the period under review, the average rent prices were N$3,483, N$5,443, N$9,907 and N$22,703 for the one, two, three and more than three-bedroom segments respectively.
“The growth in the average deposit charged has also been remarkably resilient during 2023, and stood at 14.8% in Q3-2023, compared to 156.1% in Q2-2023 and 3.6% in Q3-2022,” Nandago said.
The index highlighted that residential rental listings totalled 1,725 units in the third quarter of 2023, from 2,143 listings in the second quarter and 1,684 in the third quarter.
“The 1-bedroom segment continues to take up the lion’s share of residential rental listings at 53% while the 2-bedroom, 3-bedroom and more than 3-bedroom segments share at 31% 14% and 3% respectively,” FNB noted.
The FNB House Price Index reported a 12-month average growth of 3.3% in Q3-2023, down from 6.2% in Q2-2023 and an improvement from -4.5% in Q3-2022.
Regionally, the coastal area recorded the highest growth at 14.4%, while the central, northern, and southern regions had growth rates of -1.1%, 0.8%, and 7.3%, respectively.
This comes as the overall national house price now stood at N$1,218,086 during Q3-2023, lower than N$1,242,713 in Q2-2023 but higher than N$1,179,248 over the corresponding period in 2022.
The average prices for the central, coastal, northern and southern regions stood at N$1,552,000, N$1,420,000, N$865,000 and N$886,000 respectively.
Nandago noted that with a shallow cutting cycle expected, the residential property market will remain constrained as affordability bottlenecks persist.
“We take note of potential upside that could result from the adjustments in LTV ratios and the impact of oil, gas and renewable energy activity at the coast, however, important to bear in mind that while demand remains weak, supply side issues remain a binding constraint on buying activity in the residential property market,” she said.
