2016 will be a great year for the rental market but one major risk looms for landlords

Over the past few years, demand for rental properties in the Helderberg Basin has been consistently high - with a big influx of people from Gauteng playing a big part in this.

“In fact,” says Johann van der Merwe Junior, co-franchisee of the Rawson Property Group’s Somerset West and Strand franchises, “2015 saw 40% of our rental clients coming from Gauteng and we don’t expect this to change this year.”

According to van der Merwe, who heads up both the rental and commercial teams at his franchises, Rawson Helderberg (made up of Somerset West, Strand and Gordon’s Bay) achieved a 13% increase in their average rental per property in 2015. This number is very satisfactory when compared to the Western Cape’s average rental increase of 8.4%. Now in the second position nationally (Northern Cape has the top spot), Western Cape saw significant growth in average rental values last year when compared to other provinces, boding very well for those investing here.

“At Rawson,” explains van der Merwe, “we don’t just see our clients as landlords and ourselves as agents, we see them as investors and our team as asset managers. Our main aim is to increase the value of our client’s investments and the fact that we were able to do so noticeably last year makes us even more set on pursuing this upward property yield trend this year.”

However, says van der Merwe, there is one risk looming for landlords in 2016: the defaulting tenant.

“With a worsening economy, soaring food prices and the possibility of an excessive electricity price hike,” says van der Merwe, “2016 is going to be a tough year for the consumer, making our understanding of the average tenant’s financial profile all the more important.”  

Statistics, says van der Merwe, show that during the last three quarters of 2015, tenant incomes declined (or remained the same) while debt repayment commitments increased. As a result, tenants spent close to 37% of their income repaying debt as opposed to 32% at the beginning of 2015 – and unfortunately, this percentage is set to increase this year.

“2016 will see us protecting our landlords and their assets like never before,” says van der Merwe. “With tenant payment profiles expected to worsen, good tenant selection will be paramount and our vigorous screening methods will be more important than ever – ensuring that we only place the very best of tenants, those who will pay on time and in full each month.”

In addition to their strict tenant screening process, Rawson Helderberg will continue to bring peace of mind to their landlords through their solid collections infrastructure, improved legal handover processes, fast acting eviction procedures and structured administration, leaving no stone unturned.

“To guarantee rental income each month, we have also introduced an extremely affordable rental insurance,” says van der Merwe.

“This will include guaranteed rental income for three months (in case of tenant eviction), an eviction cost of R50 000, one month’s rent for maintenance and one month’s rent if a tenant absconds.”

“2016 is going to be a tough year for most but we believe that with our latest technology and infrastructure, we will continue to increase the value of our landlord’s investments and further dominate the market with our exceptional value proposition.”

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