select
|

As predicted, buy-to-rent investment in residential property now very much back in favour

Those property experts who, like Bill Rawson, Chairman of the Rawson Property Group, continuously advocated investment in residential property (even at the height of the recent recession) took something of a hammering in the 2009 downturn. 

The reason for this was that, as the latest figures from Payprop have shown, in years like 2010 and 2011 rental growth was limited to 4 to 6% per annum. Now, however, it appears that everything that Rawson predicted about an eventual rental upswing is becoming true: Payprop’s latest figures indicate that the average monthly rental for South Africa is now nearing R5,800. 

“This is a very big uptick on the R5,200 average previously prevailing in the middle of 2011 and the early months of 2012 and Joan Muller of the Financial Mail has pointed out that the year-on-year increase is now above 10%.”

“This greatly improved situation,” commented Rawson, “is exactly in line with what the analysts at the Rawson Property Group said would happen over a year ago. At that time, it may be remembered, we advised Cape buy-to-rent investors to have a very good look at the central Cape Peninsula and Atlantic Seaboard suburbs. Today in Hout Bay, our rental division is now achieving average rentals in free standing homes in the region of R9,000 per month and in the academic belt of Rondebosch, Rosebank, Mowbray, Claremont and Kenilworth, single rooms are renting at anything between R3,000 and R5,000 per month.”

Among the factors likely to drive rentals in the next two to three years, said Rawson, are the growing shortage of stock, the performance of the economy and the consequent rises, if any, in the interest rates.

“Our management here at the Rawson Property Group,” said Rawson, “is continuously being asked to make forecasts on these matters, but that is simply not possible. All that one can say is that, except in the very worst recessionary conditions, rents have always tended to keep abreast, or ahead, of inflation and, as things now look, the government’s commitment to achieving growth makes it highly unlikely that interest rates will rise by any significant amounts for at least another year or more – even if inflation does break the 6% barrier. I, therefore, continue to advise our clients to purchase regularly and to build up their portfolios.”

Many potential buy-to-rent investors, added Rawson, have shied away from this asset class because they have burnt their fingers, but in most cases this is the result of going at it alone as landlords (going the DIY route) or appointing an unsatisfactory rental agent.

“Both courses,” said Rawson, “can only too easily lead to very poor tenant selection and the subsequent problems of late payment and poor home maintenance. It has to be realised that in many groups, including our own, there are excellent rental agents who will ensure that their bad debts are kept below 3% of the total and this is the type of agent that the investor should appoint.”

Looking at the bank loan situation, Rawson said that there are now signs that the banks are increasing their appetite for lending bond finance and this will lead to more buyers entering the market and further price rises, possibly, he predicted, in the region of up 12% per annum. The sub-R1 million bracket, added Rawson, will be particularly active and could see the greatest price increases, although there are now also signs that the middle and upper brackets are beginning to witness price increases at last.

Rents, added Rawson, will increase along with prices.

“This is another easily definable trend which we have witnessed in the past and which is now once again making itself evident.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 20 Feb 2018
      Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Feb 2018
      The suburb of Greenstone in Johannesburg east came to be over the last two decades. “In the beginning, it was literally just a hill with not so much as a shopping centre,” says Michael Levy, Property Consultant at Jawitz Properties Bedfordview. Today it has plenty shopping facilities and is fully built, boasting high-density, upmarket housing and residential estates, though still has a few pockets poised for commercial development.
    • 20 Feb 2018
      A major shift in the ageing paradigm has precipitated an equally dramatic transformation in the retirement sector, with modern accommodation options worlds away from the conventional model.
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
        
    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