Durban rentals higher than national average

Savvy investors in Durban’s residential property sector have secured rental returns significantly higher than the national average, bolstering the argument that property remains a sound investment vehicle.

The recently-released Trafalgar December 2006 rental index reflected that growth in the Durban residential rental market was second only to East London – which had come off a low base – and matched rates achieved in Johannesburg. However, that market was being externally buoyed by high levels of immigration and a catch-up in high-density areas.

Nationally rentals have grown more than 25% in the past three years, experiencing a substantial upswing since June 2005 as the market tracked the medium-term surge in residential house prices.

The report demonstrated how rentals have risen alongside the market boom with property still offering investment opportunities. The Durban market has consistently returned good growth for investors, achieving 31% in the past three years.

Trafalgar chairman Neville Schaefer welcomed the growth, saying rentals had consistently shown solid growth with the figures confirming the long-term stability of property as an investment.

Several factors had converged to push up rentals. Essentially, high house prices and rising interest rates had pushed average bond repayments to around 9% of household incomes, forcing people in lower income brackets to rent rather than stretch their budgets with home purchases.

Schaefer believed new rentable developments or redeveloped blocks – including inner city suburbs like Warwick Triangle and Albert Park - were being mopped up in line with escalating demand.

“Lastly, incomes are still rising relatively rapidly – although not at the same pace as house prices and home loan rates – meaning tenants can afford higher rentals. These are cyclical forces typical of a slowing house sales cycle,” Schaefer said, acknowledging these factors would remain until the interest rate cycle resumed a downward trend, prompting further developments and refurbishments.

“What has not yet emerged is a general trend for large city rentals to outpace their small city counterparts, reflecting how the South African rental market had not yet settled,” he said.
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