Many of the factors that are now slowing down house sales in the Greater Cape Town area will, conversely, also help to raise rentals, says Mike Greeff, Chief Executive of Greeff Properties.
“Over the last year,” said Greeff, “new landlords have been in the not too healthy position of recovering only 40% to 50% of their monthly bond repayments (if they had geared up) – but that is set to change. Higher interest rates, higher inflation (now at almost 7,5%) and the National Credit Act, while limiting sales, will make rental property more sought after. The demand here will be reinforced in the Southern Suburbs of Cape Town by the shortages of land, housing stock and new developments, all of which will characterise the residential property market in 2008.”
Identifying a typical Southern Suburbs rental scenario, Greeff mentioned apartments in an upmarket complex for which the landlords were paying roughly R16 000 per month on their bonds, but were recovering only R7 800 per month in rent. “When such leases as these expire, said Greeff, they are likely to see a significant jump up - by, he estimated, an increase of 12,5% in the first half of this year and thereafter by 15%. By the end of 2008, he said, the rental increases will be in the region of approximately 20%
“The stock market is now seen to be carrying much more risk than it has done for several years and with industrial output curbed by power and by the skills shortage, certain investors will be looking for safer returns in property and/or cash - and right now new development property prices are at more competitive levels than we have seen for some time.”