select
|

How your annual rental increase is calculated

Nobody wants their rent increased, but landlords and agents have to adjust their rentals in relation to market factors.

Having some insight into the contributing factors to a rental calculation will help you to understand what influenced your rental increase this year.

As a rule of thumb, rents are usually increased by 8% to 10% annually, but Pieter Janse van Rensburg, the franchisee for Just Property in George, says that a number of different factors are taken into account when calculating a rental, and shifts in all of these will be passed on to the tenant.

“It’s also worth bearing in mind that many of the costs of property ownership – including interest rates, insurance and municipal rates – do not remain static, so landlords have to recalculate annually to ensure that their operating costs remain viable,” says Janse van Rensburg.

These are some of the factors that he says could influence an increase:

The market value of the property – Rental prices are usually calculated at between 0.8% and 1.1% of the value of the property monthly. Therefore, each year, the increased market value will have an influence on the rent that is charged. Tenants should be aware of fluctuations in local property prices so that increases don’t catch them off guard.

Historical trends – Generally speaking, with all other factors remaining more or less the same, the annual rent increase is likely to follow the same pattern as previous increases. If this is your first year of renting, find out what the increases have been in the past so that you can prepare for what they will be in future.

Consumer Price Index – The CPI measures inflation that affects consumers and will also be taken into account in rent calculations. Landlords and agents will have to consider what tenants can afford in high-inflation years, while securing their own profitability under the same conditions.

Developments in the area – Changes in the surrounding neighbourhood may also influence rental increases. A new shopping centre or school may make the area more desirable for families or workers. Obviously, any improvements in the suburb in which you are renting will also benefit you, so increases for these reasons also need to be considered.

The market – While there are many external factors that affect how rental increases are determined, landlords and agents are also influenced by what the market dictates. They can only increase their rentals to an amount that tenants are willing to pay so they will have to take care to make any adjustments fairly and realistically.

Any room for negotiation? Although you should bear in mind that all lease agreements are business transactions and rent increase are calculated for this purpose, your best hope for the lowest possible increase is to be an exemplary tenant. Always pay your rent on time and take good care of the property you are renting. Sensible landlords would prefer to keep you on if the relationship has been positive.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 21 Jun 2018
      Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry.
    • 21 Jun 2018
      A recent news story about a blind tenant caught in a legal battle with his body corporate over letters and notices he was unable to read and consequently comply with has raised the question: what are the legal obligations for landlords with disabled tenants?
    • 21 Jun 2018
      A trend that’s taken the world by storm in recent years is that of hygge (pronounced: hue-guh), a Danish concept that is about creating intimacy, connecting with loved ones and taking pleasure in small, ordinary things.
    • 20 Jun 2018
      Buying or selling real estate isn’t as easy as it is portrayed sometimes, especially if there is a death of a party during the transaction which can make it awkward, tricky and inconvenient.
    • 20 Jun 2018
      With interest rates remaining at historic lows and banks continuing to compete for mortgage finance business, first-time buyers with funds at their disposal are currently well-placed to gain that initial foothold on the property ladder, particularly in the light of the slightly lower growth rates currently experienced in residential property values.
    • 20 Jun 2018
      The average size of bond granted in SA has grown 7,7% in the past 12 months to R934 000, according to BetterBond, the country’s biggest bond originator.
    • 19 Jun 2018
      In the current market, letting out a property can be a good option as rental demand remains strong, especially in the northern suburbs of Johannesburg. This is according to Chris Renecle, MD of Renprop. However he says that before homeowners let their property out, there are five key points they should make sure are covered before they market the property for rent and sign any lease agreements.
    • 19 Jun 2018
      The Capetonian dream is to live by the ocean with the iconic mountain making an appearance somewhere in the horizon. But, that dream comes with a hefty price tag that many simply cannot afford. But, should you venture some kilometres out of the city centre, entirely new realms of beachside bliss await you …
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK