Quarter 3-2023 was stable for renters and landlords

Key Highlights

• The 12-month average rental index growth stood at 4.7% in Q3-2023 from 5.8% in Q2-2023 and 0.1% in Q3-2022.
• The national weighted average rent eased slightly to N$7 177 in Q3-2023 from N$7 190 in Q2-2023 and N$6 893 in Q3-2022.
• Rental growth continues to be supported by the more than three-bedrooms segment registering a 12-month average growth of 9.2% to N$22 703.
• Rental yields remain unchanged at 7.0% in Q3-2023, equivalent to the rental yields in both Q2-2023 and Q3-2022.
• Rent yields beat inflation, which stood at 6.2% on a 12-month rolling average basis in Q3-2023.

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. The average rent price on a 12-month rolling basis stands at N$7 177.
When considering bedroom size, the 3-bedroom and more than 3-bedroom segments grew by 4.0% and 9.2% respectively, while the 1- and 2-bedroom segments contracted by 4.6% and 9.0% during Q3-2023.

Average rent prices are N$3 483, N$5 443, N$9 907 and N$22 703 for the one, two, three and more than 3-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 15.1% in Q2-2023 and 3.6% in Q3-2022.

The resilience of the rental market is a surprising outcome, given the high price and elevated interest rate environment.

Interest rates increased by a cumulative 400bps during the period in review, 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, and landlords would be willing to bargain lower rental prices and deposits with prospective tenants.

It seems that individuals are delaying purchasing property and choosing to rent for longer, given the elevated interest rate environment and affordability constraints. The significant decline in house price transaction volumes (-27.7% in Q3-2023) underlines this view.

Adjustments in the loan-to-value ratios became effective on 31 October 2023, which might incentivize investments in residential property, thereby increasing the supply of rental property.

The rental market has defied the weak consumer environment, remaining resilient during the first three quarters of 2023. Inflation is expected to moderate over the course of the next two years and interest rates, having peaked in 2023, should lower by the latter part of 2024. We expect the rental market to remain stable as these dynamics play out. Furthermore, the decision by individuals to delay the purchasing of properties and rent for longer will continue to support the rental market.





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