Statistics support the logic of buy-to-let investments

Recent reports from TPN (Tenant Profile Network) on the residential rental market help to explain why buy-to-let purchases have increased so significantly over the last year, says Bill Rawson, Chairman of the Rawson Property Group.

“Summing up the TPN data,” said Rawson, “one fact becomes clear: investing in property for renting is not high risk. The typical South African tenant is a fairly reliable payer – and the risk is minimised by good tenant selection.”

The TPN report shows that in mid-2013 71% of South Africa’s tenants paid on time, 4% paid within the usual extra time allowed and 8% paid late. Another 11% paid, but not in full – and 6% did not pay at all, at least until coerced by legal or other action and/or the threat of eviction.

Reviewing these figures, Absa’s home loans division in their 2013 fourth quarter report, said Rawson, also mention that residential rental inflation did not rise significantly over 2013: it, in fact, averaged only 4,2% year-on-year for homes and 5,4% year-on-year for townhouses and flats — but, said Rawson, shrewd investors are achieving far better returns.

Absa also quote the TPN statistics which reveal that 23% of tenants are paying under R3,000 per month, 62% between R3,000 and R7,000 per month, 11% between R7,000 and R12,000 and 4% more than R12,000 per month.

“The TPN figures,” said Rawson, “should be encouraging to potential buy-to-let investors because they reflect the total rental situation countrywide. They cannot, therefore, be as bullish as the buy-to-let market.”

In this market, he said, four factors help increase the viability of the investment.

These are:

1.    The units bought for rent are carefully chosen and are often in prime, high demand areas where there is seldom any shortage of tenants. These, values and rents, rise well above the average rate.

2.    Rental agents are very active in the buy-to-let market and, being adept at investigating credit, previous rental and employment records tend to be efficient at eliminating potentially poor tenants. Investors’ returns on managed rental units are usually, therefore, better than the average. Such agents also tend to be good at seeing that tenants maintain properties properly.

3.    Conversely, the large number (48% of the credit active population) of people with impaired credit records results in many people, some of whom are high earning, having to rent, at least temporarily. This does much to reinforce the rental market.

4.    The banks today are more willing than they have been for some time to award bonds and tend to look with favour on investors with good buy-to-let track records.

“The logic of investing in residential property today seems to me undeniable,” said Rawson. “What is more, as I see it, the returns are likely to improve over the next 24 months.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Nov 2017
      Property valued at approximately R1 billion is on High Street Auctions’ sales floor during the month of November, including the much-anticipated sale of the Tshwane Mayoral Residence and the land occupied by one of South Africa’s oldest operating gold mines.
    • 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.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us