Rental yields still competitive despite decline

Some suburbs in Windhoek have seen real pressure on the supply of rental properties, especially during the pandemic. This could be due to some households opting to work from other towns as organisations adopt flexible working arrangements.



The top five suburbs with the largest rental contractions are Auasblick (-64.2% to N$ 12 011), Windhoek West (-20.9% y/y to N$ 5 376), Katutura (-19.5% y/y to N$ 3 296), Ludwigsdorf (-14.2% y/y to N$ 12 595), and Hochland Park (-13.0 y/y to N$ 6 644). On the other hand, the top five suburbs with the highest rental growth are Windhoek North (18.9% y/y to N$ 6 706), Olympia (17.1% y/y to N$ 14 286), Kleine Kuppe (16.2% y/y to N$ 11 471), Klein Windhoek (9.0% y/y to N$ 12 270) and Elisenheim (3.4% y/y to N$ 7 878). Given the estimated average net monthly salary of N$ 17 400 in Namibia, rent affordability remains an issue on the back of the subdued labour market, with rent-to-income ratio estimated at 39%.

Rental breakdown

The total amount of rental listings recorded for the third quarter of 2021 grew by 62.6% q/q and contracted by 34.9% y/y to 3 392 units. This could highlight the gradual opening of the economy and employees returning to the workplace. As a result, overall rental demand is expected to improve. Khomasdal accounted for 11.2% of rental listings in the third quarter of 2021 compared to 10.9% recorded in the corresponding quarter of 2020. This was followed by Windhoek Central (10.4%), Otjomuise (9.5%), Pionierspark (9.2%), Rocky Crest (6.5%), Windhoek West (5.6%), Kleine Kuppe (3.6%), and Windhoek North (2.8%).

Although single-family rentals remain popular, multi-family rental units are increasingly gaining traction as families club together to make ends meet. As such, the 3-bedroom and the 3-plus-bedrooms segments saw the smallest contractions in rents of 0.1% and 0.8% y/y to N$ 9 603 and N$ 17 987, respectively.



Deposit to rent ratio

Overall, deposits charged by landlords contracted by 26.1% y/y at the end of September 2021 compared to a contraction of 23.8% y/y a year ago. The more-than-3-bedrooms segment recorded the deepest contraction of 34.0% y/y in deposit charged, followed by the 3-bedroom, 1-bedroom and 2-bedroom segments, with -29.8%, -20.8% and -18.7%, respectively.

Rental yields

The recurring question whether the property market is still regarded as a secure investment under the current economic conditions, is expected given that rental yields have been on the downward trend since the beginning of 2020, reaching 6.9% in September 2021. While one asset class should not be seen as a replacement for, or as an alternative to another, rental yields in Namibia are still competitive by regional comparison and are 3.3 percentage points higher than the prevailing inflation in Namibia.

Conclusion

The recovery of the residential rental market appears to have flatlined, with the sector now characterised by weak demand, increased vacancies and negative rental growth across the board.
According to the second quarterly report by the Ministry of Labour, Industrial Relations and Employment Creation for 2021, the industry is still seized by unpleasant numbers of retrenchments. During the said Quarter, the Ministry received notices of intent from 117 employers to dismiss a total of 881 employees. This reflects an increase of 58% and 55% q/q in respect of employees and employers, respectively.


For more information, please call: 061 – 299 2222 or visit www.fnbnambia.com.na