Significant shifts seen in a subdued Johannesburg rental market

Numerous economic and geographic dynamics have created a year-on-year downturn in Johannesburg’s property rental market in 2016, taking its toll on the province’s economy and precipitating notable market shifts.

A stylishly modern and fully furnished two bedroom apartment in Sandown which boasts panoramic views over the Sandton skyline. To let for R35 000 per month, it includes a storeroom and two parking bays as well as access to myriad amenities, from sports facilities to meeting rooms. 

The major causes of the slump in earnings derived from investment properties have been spiralling consumer inflation resulting in ever-shrinking household budgets, a gloomy national economic outlook and the highest unemployment levels in more than a decade, exacerbated by unabated semigration to the Western Cape. 
This is according to Shaun Groves, Gauteng Rental Manager for Lew Geffen Sotheby’s International Realty, who says the most notable market adjustment has been the abrupt about-turn in consumer property preferences with a sharp decline in demand for homes that previously enjoyed centre stage and offered the best returns.
“The seemingly insatiable appetite for apartments in Sandton’s CBD has dwindled as a result of rampant development and oversupply, which is being echoed in other northern suburbs, particularly, as last year’s considerable demand for high-end apartments has cooled. And in some suburbs that have traditionally been affordable and family oriented, free-standing homes are now proving increasingly difficult to let.”
He adds that correctly priced homes in cluster developments and security estates have seen the least decline in demand.
The rental markets in the Parks, however, appear to be operating independently from the general Gauteng market, with a continued status quo of high demand and low stock in these conveniently situated, sought-after suburbs.
“Parkhurst, especially, is somewhat of an anomaly with its unwavering gross yield of around 9%, which is largely due to the suburbs distinctive cachet and lifestyle appeal that has long been recognised across multiple demographics. 
“In fact, it is one of very few suburbs that even buyers who are downsizing from stately homes on generous grounds in neighbouring areas still perceive as exclusive and well matched to their lifestyles.”
Payprop’s Rental Index Report at the end of the third quarter of 2016 reflects a meagre growth of 4.8% for the Gauteng rental market since the beginning of the year – considerably lower than the 6.4% national average and disheartening for a province that has historically provided stable growth of around 8%.
Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, cautions: “While the national statistics are skewed by the almost excessively buoyant Western Cape rental market that’s running at year-on-year growth of 9.32%, there is still a rocky road ahead for beleaguered investors in Gauteng, especially those who haven’t geographically diversified their portfolios.
“I predict that the current socio-economic climate will not only continue to influence a depressed market well into 2017, but also tighten its grip on already cash-strapped consumers who will be increasingly susceptible to defaulting on payments as their limited financial wiggle room shrinks even further.
“This is clearly evidenced by Payprop data, which reveals that Gauteng tenants currently owe on average 40% of their pre-tax income to credit providers compared to 33% in March last year. The increased debt load is largely due to the fact that they have more store accounts and credit cards than their counterparts in other provinces.”
However, while the immediate forecast may not inspire confidence, Groves says it’s certainly not all doom and gloom and that investors who realistically adjust their expectations and make a concerted effort to meet tenants’ needs should be able to weather the current slump without taking too much of a knock on returns.
“The fact remains that everyone needs a home to call their own and correctly priced properties will therefore always have a market, even if it takes a little longer to find a tenant.
“And in the current market, savvy landlords realise that in order to find reliable tenants it’s essential to cater to their priorities. To this end, homes with excellent security will always be favoured, as will pet-friendly properties that are an increasingly scarce commodity.”
Groves concludes: “The key factor to successful property rental remains the quality of the tenant you place and in the current economic climate it is crucial to do the necessary due diligence to minimise the risks.
“An established agency will perform thorough credit checks on all prospective tenants as well as monitor successful applicants’ long term credit profiles. And with a comprehensive understanding of the numerous layers of legislation governing the industry, agencies will always be best qualified to deal with any tenant issues that may arise.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
    • 17 Nov 2017
      The EAAB (the Estate Agency Affairs Board) recently claimed that around 50,000 illegal estate agents could currently be operating illegally.
    • 16 Nov 2017
      Penthouses are synonymous with New York – characterised by high-rise living that is decidedly luxurious and spacious. While exclusivity comes at a price, you can still create a “penthouse” look and feel in your existing apartment or even the upstairs bedroom of a double storey house with some clever design changes and styling touches.
    • 16 Nov 2017
      The area has long been popular with kite surfers and, with escalating property prices in Cape Town itself, is increasingly in demand with home owners who work in town, but are looking to invest in more affordable properties.
    • 16 Nov 2017
      Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short term rental potential.
    • 15 Nov 2017
      Sappi, one of South Africa’s oldest global companies and a leading global supplier of sustainable woodfibre products, has moved its global and regional headquarters to a new site on the corner of Oxford and 14th Avenue in Rosebank.
    • 15 Nov 2017
      There’s an old saying in real estate that you should seek to make a profit when you buy, not only when you sell – and a large part of succeeding at that endeavour is buying a home in an area with desirable features that will enhance the resale value of your property.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us