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Rental demand in estates snookers local buyers

Strict lending criteria and historically low interest rates have combined to keep many prospective middle-class homebuyers out on a limb when it comes to purchases in secure estates.
 
Stock levels are now very low in the mid-price range of between R1,5m and R4m - traditionally a strong market for middle and upper-middle class buyers in estates – because many owners prefer to let rather than sell their properties, says Linda Bodenstein, owner of the RealNet franchise serving Pretoria's Silver Lakes and surrounding security estates.
 
She explains that, on the one hand, prospective buyers are finding it more difficult to qualify for home loans and, on the other, historically low interest rates allow owners to let their properties at rentals that cover their bond repayments and often yield extra returns.


5 Bedroom House for sale in Silver Lakes
 
"From an owner's point of view, this makes sound financial sense, since the tenant effectively pays the bond and the owner enjoys capital growth. It also circumvents drawn-out sales negotiations while prospective buyers seek finance."
 
The trend has grown strongly over the past three years in estates all over the country, Bodenstein says, and the higher demand for rental properties has inevitably led to growth in rentals. In Pretoria's signature Silver Lakes Estate, for instance, some 600 out of a total of 1700 properties are currently tenanted, and the average rental has risen from R16 000 to R26 000 in the past two years.
 
"A further reason for rental escalation is that homes in secure estates are sought-after by international professionals on local contracts. Owners are keen to let to international tenants since they pay in strong currencies and consequently find good value even at rentals higher than those local consumers would like to see. On average, landlords earn 10% more on rental contracts with international tenants.
 

3 Bedroom House for sale in Silver Lakes

“Monthly rentals currently range between R26 000 and R38 000 and the fact that international tenants sign two-year leases with the option to renew, or even long-term leases for the duration of their working contract, which may be up to five years, is an additional incentive for landlords who prefer a hands-off approach," she says.
 
Rental homes that do come to market are also often sold only on condition that the current rental contract stays in force, which effectively also eliminates buyers looking for residential properties. Bodenstein says one solution would be for developers to resume activity now in new estates, since very little came to market since the recession. "There are buyers out there, but they really struggle to find suitable properties."


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