The average rental price in Namibia amounted to N$7,348 on a 12-month rolling basis, with the two-bedroom category being the primary driver of market growth, latest data shows.
In the second quarter of 2024, two-bedroom rentals recorded a significant 14.7% increase, up from 11.6% in the first quarter, marking the highest growth among all segments.
According to FNB Namibia’s Rent Price Index, this surge highlights shifting tenant preferences amid broader affordability challenges in the rental sector.
“The average rent price on a 12-month rolling basis now stands at N$7,348. When considering bedroom size, the two-bedroom segment growth increased to 14.7% in 2Q24 from 11.6% in 1Q24 which was the highest growth posted amongst all the segments,” the report by FNB’s Market Research Manager , Mandisa Van Wyk said.
The report highlighted that growth slowed in other segments. The three-bedroom segment dropped to 8.4% from 18.0%, with the average price going for N$11,264.
The one-bedroom category saw minimal growth at 0.4%, down from 1.5% with the average one-bedroom going for N$3,579.
The above three-bedroom segment remained in contraction, falling deeper to -23.9% from -3.4%.
Furthermore, rental price growth slowed in the second quarter of 2024, with the 12-month average dropping to 2.7%, down from 5.8% in the same period last year and a seven-year high of 9.7% in 1024.
This marks the lowest growth rate since the index exited contraction in the first quarter of 2023, indicating a deceleration in the rental market’s recovery.
The slowdown in rental growth reflects affordability challenges faced by consumers, who are grappling with budgetary pressures and elevated rental prices.
The increased rental costs seen in the first quarter of 2024 likely strained household cash flows, creating barriers to entry for new tenants.
“The impact of increased rental prices in the first quarter of 2024 could have added to the budgetary pressures individuals face and suggests elevated barriers to entry for new clients reflected in the lower demand for rentals in the second quarter of 2024,” the report read.
Looking ahead, rental growth is expected to remain positive but subdued, as rising rental inflation up to 5.1% year-on-year in November 2024 from 2.1% in the prior year could further dampen demand.
The reduced supply of residential rental listings, which fell to 218 units in 2024 from 2,143 units in 2Q23, is also contributing to the slower growth.
Segment-wise, the share of one-bedroom rentals remained the highest at 45% in 2024, though this was a decline from 53.5% in 1Q24.
Meanwhile, the two-bedroom segment’s share grew to 35.3% from 25.6%, while the three-bedroom segment fell to 8.3% from 14.6%.
The average deposit growth slowed to 7.9% in 2Q24, down from 8.4% in 1Q24 and 12.4% in 2023. This decline suggests landlords are adjusting to the financial strain on tenants by charging lower deposits to attract renters.
Growth in deposit requirements varied across segments. One-bedroom and three-bedroom categories saw increases to 23.0% and 20.5%, respectively, while the two-bedroom and above three-bedroom segments recorded declines, with the latter plunging to -76.5% in 2Q24 from -68.5% in 1Q24.
The deposit-to-rent ratio improved slightly to 4.9% in 2024 from 4.1% in the previous quarter, supported by declining deposit rates and falling rental prices.
“The lower trend in deposit growth continues to suggest that landlords are responding to household monetary pressures and charging slightly lower deposits to attract more tenants. Rental deposit requirements are still a voluntary practice in Namibia,” the report read.
The report further said that gross rental yields, a measure of return on investment for landlords, declined slightly to 7.2% in 2024 from 7.5% in 1Q24.
Despite this, yields remain above inflation, which stood at 5.1% in Q2-2024, translating to a real return of 2.1% on rental properties.
