How do you negotiate a fair rental increase?

Author
MyProperty
South Africa's #1 independent property portal

How to determine reasonable increases

Even in traditionally strong markets, it is still very easy to lose a tenant due to unreasonable rental escalations. So how do you go about determining what is reasonable and what is not? And what’s the best way to weigh up the benefits of retaining an existing tenant against the disadvantages of reduced escalation?

This can be very hard to determine for someone that is a new landlord and we would suggest that you work with a rental agent to help you manage your property and that can give you advice on crucial matters like these. For more seasoned landlords we would suggest using services that specialises in the rental market. They usually have in-depth market reports that will allow you to see what the market is doing in terms of rental demand, increases or decreases in rental prices and what percentage of tenants are in good standing.

You will have to have a workable knowledge of the area that your property is located in and what rental prices in the area look like. Keep in mind that your tenant can do a property search and see the average price of rentals in an area and they will know if your escalation is extreme.

The 10% rental increase myth

A lot of people are still under the impression that a 10% annual rental increase is standard, the reality, however, is that there are no legislated standard figures - increases are set on a case by case basis.

This doesn't mean that landlords can simply pick a number and force a tenant to accept the increase.

All rental increases need to be reasonable, the Rental Housing Tribunal is very clear on this. Therefore, any escalation figure needs to be backed up with properly researched trends and figures.

Not just about the numbers

Good tenants, who look after your property, pay on time, and communicates well with you or your managing agent can be worth their weight in gold. This is even more true during periods of economic crunch and when tenants in good standing are few and far in between.

For tenants, paying on time is one way of ensuring a better footing when rental increases are being negotiated. Other things that you can do to help you become an exemplary tenant is by being proactive with day-to-day maintenance chores and minor fixes. If you call the landlord for every little thing that needs to be replaced they won't be too sad to see you go.

Remember to have all the information in the new contract and make sure to have it signed.

Property questions?
Get quick answers about buying, selling, renting, and more from our AI powered real estate bot
Rental Property News
Property investment for wealth building - benefits and pitfalls explained
Market & Opinion
Property investment for wealth building - benefits and pitfalls explained
28 Mar 2024
Investing in real estate has long been considered a reliable strategy for building wealth because while stocks and bonds are often the go-to investment options, property is a tangible asset which offers unique advantages that can accelerate wealth accumulation over time.
read more
Navigating Low Offers: How to Boost Your Property's Appeal
Market & Opinion
Navigating Low Offers: How to Boost Your Property's Appeal
25 Mar 2024
In the dynamic South African real estate market, receiving low offers can be a common challenge for sellers. However, by understanding why you are getting low offers and implementing effective strategies, you can significantly boost your property's appeal and attract higher offers.
read more
Record median prices in the Helderberg region are underpinned by upcountry and foreign buyers
Market & Opinion
Record median prices in the Helderberg region are underpinned by upcountry and foreign buyers
22 Mar 2024
A marked increase in upcountry and foreign buyers has boosted both the sales and rental markets in Somerset West, Strand, and Gordon’s Bay during the past three years with ongoing development to meet the growing demand.
read more
Soweto property boom, values double, but still a first-time buyers’ bonanza
Market & Opinion
Soweto property boom, values double, but still a first-time buyers’ bonanza
11 Mar 2024
Soweto is one of the most dynamic property markets in the country. It is a bustling neighbourhood with some 37 suburbs which are home to over 186,000 properties, more than double compared to 1994 according to Lightstone data.
read more
Find houses to rent
Click on a province and select a town to view available properties to rent
Real Estate Tools
Get pre-qualified
Make offers with confidence knowing what you can afford. Then shop for the best home loan
Bond Calculator
Calculate the estimated repayments on a home loan and savings with extra payments