Rent squeeze tightens grip on consumers' wallets

Market remains resilient
Individuals are delaying purchasing property and choosing to rent for longer given the elevated interest rate environment and affordability constraints.
Jo-Maré Duddy
On a 12-month rolling basis, average rent in Namibia in the third quarter last year was N$7 177, up 0.18% from the previous quarter and 4.1% higher than the third quarter of 2022.

In monetary terms, Namibians on average paid N$284 more rent per month in the third quarter last year than the same three months in 2022.

“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 the third quarter of 2023 from 5.8% in the second quarter and 0.1% in the third quarter of 2022,” says FNB Namibia economist Ruusa Nandago.



Size

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 the third quarter last year.

Average rent prices in the quarter under review were as follow: one bedroom N$3 483, N$5 443, two bedrooms N$9 907, and N$22 703 for three and more than three-bedroom segments.

The growth in the average deposit charged has also been remarkably resilient during 2023. It stood at 14.8% in the third quarter last year, compared to 15.1% in the previous quarter and 3.6% in the third quarter of 2022.



Constrained

“The resilience of the rental market is a surprising outcome, given the high price and elevated interest rate environment during this period,” Nandago said.

Interest rates increased by a cumulative 400 basis points, while the 12-month inflation rate stood at 6.2%.

A constrained macroeconomic environment would ordinarily limit price growth as landlords struggle to pass on rental increases to existing tenants amid deteriorating affordability, Nandago said. Additionally, in this scenario, landlords would be willing to bargain lower rental prices and deposits with prospective tenants, she said.

“A potential explanation for this conundrum is that individuals are delaying purchasing property and choosing to rent for longer given the elevated interest rate environment and affordability constraints,” Nandago said.



Volumes

The significant decline in house price transaction volumes – down by 27.7% in the third quarter of last year – corroborates this view.

“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,” Nandago said.

Moving forward, Nandago expects 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.

“We also take note of the 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,” she said.

Comments

Namibian Sun 2024-11-08

No comments have been left on this article

Please login to leave a comment

#N/A Currency: GBP to NAD 22.63 | EUR to NAD 18.85 | CNY to NAD 2.44 | USD to NAD 17.49 | DZD to NAD 0.13 | AOA to NAD 0.02 | BWP to NAD 1.25 | EGP to NAD 0.35 | KES to NAD 0.13 | NGN to NAD 0.01 | ZMW to NAD 0.63 | ZWL to NAD 0.04 | BRL to NAD 3.06 | RUB to NAD 0.18 | INR to NAD 0.21 | USD to DZD 132.85 | USD to AOA 909.05 | USD to BWP 13.4 | USD to EGP 49.25 | USD to KES 129.2 | USD to NGN 1680.41 | USD to ZAR 17.49 | USD to ZMW 27.15 | USD to ZWL 321 | Stock Exchange: JSE All Share Index Same 0 | Namibian Stock Exchange (NSX) Overall Index 1878.29 Up +1.09% | Casablanca Stock Exchange (CSE) MASI 14487.67 Up +1.33% | Egyptian Exchange (EGX) 30 Index 31267.47 Up +0.72% | Botswana Stock Exchange (BSE) DCI Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 692.52/OZ DOWN -0.0053 | Copper US$ 4.33/lb DOWN -0.0206 | Zinc US$ 3 004.80/T DOWN -1.88% | Brent Crude Oil US$ 75.28/BBP DOWN -0.0084 | Platinum US$ 982.39/OZ DOWN -0.0148 #N/A