By: Justicia Shipena
Rent in houses with more than three bedrooms have risen the most in the last 20 years, according to economists at Simonis Storm Securities (SSS).
A SSS study on Namibia’s property and housing market for August 2023, found that rental prices grew from 1990 to 2015 and then plateaued since then.
The research firm stated that houses with more than three bedrooms observed the highest rent increases, averaging 11.3% per year over the past 20 years.
Single bedroom dwellings, on the other hand, saw the second highest average annual rent rise, rising by 6.8% on average per year, compared to 6.4% for two bedroom houses and 6.3% for three bedroom houses.
SSS said the fact that single bedroom residences witnessed greater monthly rent hikes than multiple room houses might support the idea that individuals prefer to live alone since they marry later in life.
The average monthly rent in Namibia climbed by 191% between January 2002 and March 2023, the firm said.
Monthly rent has nearly quadrupled on average over the previous 20 years, it added.
Meanwhile, the deposit-to-rent ratio grew, peaked in 2015, and has subsequently declined.
SSS reckones that greater upfront expenses for tenants that existed previous to 2015 have now been reversed, with the rent-to-deposit ratio trending below historic levels since 2020.
They noted that present rental conditions are better in terms of affordability for renters since persons with limited savings or lower incomes may afford to rent a house more affordably than in previous years when the deposit to rent ratio was significantly greater.
“This is supported by data from FNB which shows that average monthly rent across Namibia was on a steady incline between 2002 and 2017, peaking at N$11,407 per month in February 2017.”
Since then, the average monthly rent has been falling, hitting a low of N$5,804 in December 2022 and rising slightly to N$7,156 by March 2023, according to the report.
As a result, SSS believes that both property prices and rental rates have fallen since 2015, but have recovered after December 2022.
A low deposit to rent ratio, SSS maintains, indicates a rental market with low demand and an abundance of rentable units.
However,SSS stated that deposit to rent ratios will vary by area and town in Namibia, but this could not be investigated without disaggregated data, saying it anticipates the deposit-to-rent ratio to rise in the future, making it more difficult for tenants to obtain rental houses.
The firm says this estimate stems from a lack of available rental housing stock, which might lead to landlords raising rent rates in the future.
“Indeed, the rise in interest rates could also lead homeowners to increase rentals on their investment properties.”
SSS says while low demand and plentiful rentable houses have typified the rental market since 2016, it is now clear from numerous rental agency interactions that demand is growing significantly and housing supply is restricted in the rental market.
“Some agents allude to housing stock shortages in all price classes and so they struggle to satisfy client needs.”
According to several of the agencies The Villager spoke to, demand for rentals along the shore comes not just from locals, but also from foreigners from South Africa, Europe, and the United States.
Some real estate brokers believe that the surge in rental demand is attributable to affordability concerns among first-time home purchasers.
SSS says due to the uncertainty around interest rate rises, some households who cannot afford home loans in their budgets are now deciding to rent a property rather than buy one.
“Uncertainty on when the interest rate hiking cycle will end has caused some clients to postpone their house buying plans.”
Several agents discovered that monthly home loan repayments and monthly rent for the same houses varied, and the gap is rather significant for some properties, SSS noted.
Aside from easing the financial burden of acquiring a rental home, the firm observed that a low deposit to rent ratio indicates a rental market with low demand and an abundance of rentable units.