Rental index shows luxury rentals are leading the pack

The PayProp Rental Index’s 2014 Annual Report has shown that the South African rental market experienced stable growth over 2014.

The average national rent was R5 963 in January 2014, ending on R6 207 in December– an increase of just over 4 percent for the 12 month period. The rental price band of R15 000 and over is the fastest growing in South Africa.

PayProp group chief executive, Louw Liebenberg, says it comes as no surprise that the Northern Cape is a major contributor driving the growth in this category.

“High-value rentals in the Northern Cape have almost tripled in number over the course of 2014 due to rapid industrial expansion. Mining as well as alternative energy projects are fuelling growth in the province,” says Liebenberg.

The Northern Cape is the one province where damage deposits of less than a month’s rental are still accepted – a sharp contrast to the national average of damage deposits almost 1.5 times the monthly rental amount. The index highlights other geographic areas that are drawing interest with growth in the higher price categories as KwaZulu-Natal and Gauteng.

Investor returns were stable over 2014. Gauteng is now the most expensive province in which to own a property, with Limpopo being the cheapest. Interestingly for investors, the second cheapest province is now the Northern Cape. When combining the lower-than-average cost of ownership and fast-growing rental values, the Northern Cape is the current darling of buy-to-let investors providing a net return of 6.27 percent compared to the national average of 5.05 percent.

Liebenberg says the weakening of rental growth in the last quarter may be linked to tenants’ ability to pay being under pressure. This has meant that in many instances landlords have chosen to keep existing paying tenants at lower increase rates, rather than risk placing new tenants who may not be able to pay. The inclusion of tenant financial profiles as part of this rental index has provided a valuable view into the potential ability of the average tenant to pay rentals.

“Using the PayProp Tenant Assessment tool we are adequately able to review the ability of tenants to meet their financial commitments, particularly their rental commitments. What has proved glaringly obvious is that SA tenants are over-committed in terms of their debt repayments with individuals on average facing a debt burden that is nearly double their rental commitment,” says Liebenberg.

Some of the key statistics reveal that an average tenant spends almost twice their rental payment on loan and credit agreement repayments – leaving very little financial manoeuvring room. What’s more, a significant proportion of tenants applying for tenancy at estate agents have major financial defaults against their names – showing that growing financial strain has already affected the average consumer.

“The rental market is still growing and our caution to the market remains that tenants are under increasing pressure. In this context we feel that investors who want to succeed in this market will be the ones who carefully screen their tenants, ensure that tenants can afford the leases they sign and who manage their costs carefully.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us