Why the rental market in South Africa is changing

The housing market in South Africa has been turned upside down again with the current boom in the rental market. While the market has seen a surge in the number of buyers due to low bank interest rates and favorable credit standards, there is now a strong demand for rental properties.

Deprived of oversupply and the aggravating effects of the Covid-19 pandemic, this sector has come under significant pressure over the past 18 months. Still, industry experts cite that is about to change.

Grant Smee, Managing Director of Only Realty Group, said: “The residential real estate industry tends to fluctuate. While over the past 18 months a notable buyer’s market has gathered momentum, homeowners can now breathe a sigh of relief as the rental market begins to gain momentum.

Why the lag?

While homeownership was previously seen as a marker of ‘adulthood and independence’, South Africans now prioritize quality of life, flexibility and cash flow.

“Renters can enjoy the benefits of a home without being tied to a long-term commitment and unanticipated costs. In many cases, tenants can live in homes that they may not be able to finance through a home loan, ”said Smee.

He added that homeownership is still out of reach for many, mainly due to unforeseen costs, potential increases in pension rates, high levies and escalating rates and tariffs.

Increased demand from tenants in good standing

According to the TPN Rental Monitor, Smee pointed out that the latest statistics indicate a change in demand, with rentals up 1.4% (13.8%) in the second quarter of 2021.

Another factor that plagues landlords has been finding tenants “in good standing”. “The term good reputation is used a lot in our industry. These are tenants with good credit and history who pay their monthly rent on time every month, ”said Smee.

Tenants in good standing fell to 73.5% in the second quarter of 2020, but rates now hit 80.34% during the same period in 2021. “Based on unemployment statistics, this trend indicates that tenants in good standing or potential buyers with good credit records choose to rent rather than buy, ”he said.

A notable trend in rental is that of shared accommodation. “Renters who spend more time at home are looking for larger properties and sharing the costs with family and friends to improve their quality of life. “

The latest figures also show increases in the average rental price in provinces such as KwaZulu Natal, Northwest, Western Cape, Mpumalanga and Limpopo. Gauteng, Free State and Northern Cape saw a drop in the average rental price.

Much of this was due to oversupply and landlords lowering their prices to secure a good tenant, the real estate expert said.

If the price is right

Smee noted that the middle market (middle price range) is currently enjoying sustained demand for rental properties. “Quality and affordability are two key factors here and landlords are encouraged to adjust their short-term rental expectations to find a good tenant. “

TPN data shows the Western Cape was hit by rising vacancy rates to 14.38% and a negative annual rent increase (0.1%) in the second quarter of 2021.

However, Smee said he sees healthy and sustained demand for rental properties in the price range of R7,000 to R10,000 per month.

“This is putting pressure on Cape Town‘s CBD and areas on the Atlantic coast where rentals are significantly higher and yields (yields) are under major pressure.” He added that Section Properties are currently experiencing the highest returns.

“East Rand, West Rand and Johannesburg North continue to generate some of the highest returns with areas such as Port Elizabeth, Dolphin Coast, Northern Cape Suburbs and Helderberg proving to be popular investment areas. “

Advice to owners

Smee shares his top tips for securing and keeping a tenant in good standing as follows:

  • Patience is a virtue: “Too often, landlords are so desperate to find a tenant that they sign on the first request they receive. Take the time to do your due diligence – work with a trusted real estate agent to complete all of the relevant checks. Weigh the pros and cons and be sure to call their references.
  • Be selective in your strategy. Smee urges homeowners not to list their property with too many agents. “If you sound desperate, you will fall prey to chancellors and low rental offers.”
  • Short-term losses, long-term gains: “With the number of properties on the market, it is better to inquire before registering your rental property. Find out what other homes are rented for to make sure your listing is competitive. In many cases, we encourage landlords to lower their price slightly for the right tenant, especially a tenant willing to sign a longer lease.
  • React quickly: “If you’ve found a good tenant, then the key to keeping him is to stay on the ball. If a tenant has a maintenance request, communicate and resolve it as quickly as possible. It also ensures better maintenance of your home.
  • Communicate: “Keep the lines of communication open. If a tenant is struggling to pay their rent on time, structure a plan that works for both of you. Checking in on the tenant every few months also helps promote an open and fair relationship. “
  • Severe but fair: “In a difficult economic context, tenants can benefit from owners. Make sure you set the ground rules up front and share any relevant documentation when it comes to complex rules and regulations.
  • Offer renewal incentives: “If your tenant’s lease renewal is approaching and it’s worth keeping, be sure to negotiate an incentive to make sure it stays in place. It could be something as small as a shed or home modifications i.e. new countertops, floors, house painting etc. “, did he declare.

Read A Change In The Rental Market In South Africa – Here’s How Much Money People Are Paying Right Now.

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