select
|

South African property market giving increasingly good returns

Constant advice from Tony Clarke, the Managing Director of the Rawson Property Group, and other senior staff in the group to the effect that now is the time to get into buy-to-let residential property has, says Clarke, been confirmed by a highly informative report from Payprop, the nationwide rental accountancy firm used by so many estate agents and landlords.

This report, said Clarke, indicates that there are now 1,7 million rented homes in the “formal" residential market.  This figure is higher than most analysts had previously estimated.

“Just over 60% of all South Africa’s ± 10,000 estate agencies are now involved in letting – often as a complement to their core selling work — but in a growing number of cases as the specialist, more important activity.  Of the total of 1,7 million rented homes, approximately one-quarter are managed by rental agencies, leaving 1,3 million in the hands of private landlords.”

So far, so good.  The market is quite clearly big and growing.  However, is it really a good place for the investor to be?

Payprop, said Clarke, indicate – although they do not state this directly – that the answer to that question should be a definite “yes”, the reason being that throughout 2013 the one wholly valid descriptive word for the South African residential market would have been “recovering”.

In the first quarter of 2013 year-on-year rental increases were estimated by Payprop to be 5% up. In the second quarter the recovery had, by Payprop’s estimates, gained momentum and rental growth was calculated at 7% (i.e. ahead of the inflation rate for the first time in several years). By the third quarter the figure had reached 10%, which then fell back to 9% in the fourth quarter.

In cash terms, said Clarke, the average monthly rental rose in 2013 from R5,473 to R5,867 and this year it is set to break the R6,000 barrier. The majority of South Africa’s rentals are still in the R2,000 to R5,000 and R5,000 to R7,000 brackets, but homes renting at higher prices will, it is now predicted by many estate agents, also see significant growth in rentals by the end of this year and in 2015.

A trend which is working in favour of landlords, added Clarke, is that which makes tenants, not landlords, responsible for levies and rates and taxes. This means that the regular outflows from the landlord’s account, which can be as much as 35% of the rent (if the agent’s commission is also included), are in a few cases now being significantly reduced. This type of solution, he said, does require very careful watching of the tenant’s account because proof of these payments must be forthcoming.

On a more cautious note, Clarke has also warned investors that while the buy-to-rent market, with a projected growth of 8% this year, is likely to remain a good one, the tough economic conditions now being encountered will call for a specially careful and diligent tenant selection and management.

“All our experience in the rental market,” said Clarke, “shows that immediate and firm action is needed as soon as rent payment deadlines are not met – and this is a fact that the laxer, do-it-yourself landlords all too often overlook.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 26 May 2017
      The rules for handling rental deposits are very clearly outlined in the Rental Housing Act, and yet certain misconceptions still abound amongst landlords and tenants.
    • 26 May 2017
      Sounds of the door shuffling on its hinges echo through the house. You look around but see no one, just shadows. As panic washes over you the first thoughts that run through your head are run, get out as fast as you can. Are you safe?
    • 26 May 2017
      The Monetary Policy Committee (MPC) announced yesterday at its third meeting of the year that interest rates will remain unchanged - we take a look at some of the thoughts from property industry leaders on this decision.
    • 25 May 2017
      While the decision by the Monetary Policy Committee meeting to hold the repo rate steady was expected, a reduction would have provided a much-needed boost for consumer confidence and market sentiment given the ongoing weak economic growth experienced in South Africa, says Dr Andrew Golding, CE of the Pam Golding Property group.
    • 25 May 2017
      What are the basic requirements for an agreement to be considered binding? According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, for an agreement to be considered a legal binding document, there are some key aspects that need to be in place, such as the fact that it needs to be a written document that is signed by both parties.
    • 25 May 2017
      The Jacaranda City has been luring property buyers for years with its quiet, leafy suburbs and its easy access to all of the major routes that commuters might need. We take a look at five new listings we love on MyProperty from all over this beautiful city!
    • 25 May 2017
      Growth in the Standard Bank House Price Index keeps slowing and the median price of a house applied for and financed by Standard Bank was R923 000 in April, up 4.5% year on year and slightly slower than 4.6% growth in March 2017 – revised up from 4.3%.
    • 25 May 2017
      The courts have come to the rescue once again, clarifying and confirming a seller’s duty to settle outstanding municipal debt prior to receiving a property rates clearance certificate.
        
    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