Landlords in Namibia are seizing the opportunity to capitalise on higher deposits amid a surge in demand for rental properties, the FNB Rent Price Index reveals.
This comes as 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.
FNB’s Market Research Manager Mandisa Van Wyk says with rental deposits on the rise, tenants are facing increased financial obligations as landlords seek to safeguard their properties amidst heightened demand in the housing market.
“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,” she said.
Van Wyk further explained that 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.
“We continue to attribute 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,” she added.
Meanwhile, the upward trend in the FNB Rent Price Index continued for three consecutive quarters, after moving out of a contractionary period from March 2023, reaching a 12-month average of 7.2% in Q4-2023 from 4.7% in Q3-2023 and -2.1% in Q4-2022.
The report highlights that this is the highest growth observed since 7.7% as the average rent price on a 12-month rolling basis stands at N$7,257.
“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,” said Van Wyk.
According to the index, 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.
Additionally, the significant decline in house price transaction volumes (-19.1% in Q4-2023) corroborates this view.
The index observed that 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 incentivize investments in residential property, thereby increasing the supply of rental property,” said Van Wyk.
Furthermore, she noted that the arrival of expats for oil and gas exploration activities could potentially be impacting the rental market.
“Looking forward, we 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,” she added.
Meanwhile, the repo rate remains at its peak of 7.75% with a high possibility that the cutting cycle is pushed further beyond Q4-2024.
Inflation is expected to increase slightly in the coming quarters and generally interest rates are expected to have peaked in 2023, with the cutting cycle to begin in the latter part of 2024.
