Supply shortage affects Fourways rental market

Although current market conditions have created a strong demand for rental property in the Fourways area, the amount of lease agreements have dropped by 20% when compared with the same period last year, says Dieter Harck, Broker/Owner of RE/MAX One Hundred, which operates in the Johannesburg suburb of Fourways and surrounding areas.

According to Harck, his office has concluded approximately 40 rental agreements to date this year, which is somewhat lower than the numbers experienced during 2011. Previously, RE/MAX One Hundred concluded an average of over 100 rental deals per year over the past four years with an annual rental value of approximately R6, 9 million.  “While demand for rental property continues to be very high, the rental market in our area is a bit stagnant and has not performed as well as predicted. This is largely due to the fact that rental property in the area is currently in short supply and there are no new developments under construction or recently completed to cater for the huge demand,” says Christine Chambers, rental specialist for RE/MAX One Hundred.

Harck notes that although limited access to finance has created the demand for rentals due to many potential homeowners having little choice but to rent, it has also created a situation where tenants are holding onto their rental property for longer and renewing their lease agreements rather than moving. “Many buyers have a high debt-to-disposable-income ratio, which translates to only half the bond applications being approved by financial institutions. This means that potential buyers will have to continue renting until they bring down their household debt levels and show the necessary affordability levels required to gain finance approval. With limited bond approvals, no rental properties are being freed up,” says Harck.

Adrian Goslett, CEO of RE/MAX of Southern Africa, says: “It is vital for consumers who aspire to owning property to reduce their debt and start a savings program. Aside from needing to show a good level of disposable income, banks often require the buyer to have a deposit before they are willing to approve the home loan application.”

According the Harck, most rental properties in the area fall within the R5 000 to R8 000 per month range, with the greatest demand for those properties that rent out for between R5 000 and R6 500 per month.  During 2011, 96 rental agreements were signed with an average rental of R6 300. Over 50% of those were sectional title one and two-bedroom units and the majority of tenants for these units were young professionals under the age of 30 years, working within the Sandton CBD.  Harck says that this is due to the proximity Fourways enjoys to the financial hub of Sandton, along with the fact that its properties offer more competitive rental prices than similar ones in the Sandton CBD. Approximately 20% of the rentals were freestanding houses, while the balance consisted of three-bedroom cluster homes.

“Rental property continues to be in demand. However, for the number of lease agreements to  reach new and improved levels and the rental market to regain some buoyancy, a combination of factors are necessary to lift the market on the supply side of the equation, as demand far outstrips the supply of rentable stock,” Harck concludes.

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