Durban rentals nudge the national average

Buy-to-let investors in Durban achieved marginally higher residential rental increases in the year to December than their counterparts around South Africa, but the city has a long-term track record for beating the national average, statistics released in the latest Trafalgar rental index demonstrate.

Durban rentals rose 9,2% to 143 in the period under review against the 9% hike to 136,5 nationally, reflecting the extent to which residential rentals are moving inexorably upwards. In the year to December 2006, rentals rose 6,4%, but the long-term trend promises that annual rental increases will top double digit growth over the next decade.

Andrew Schaefer, MD of residential property letting agency Trafalgar, says the national medium-term rises “may not look dramatic”, but it means that a flat rented for R2 000 a month only four years ago now costs 36% more and that tenants must prepare for substantial rental increases over the next 10 years.

In Durban that increase has been even higher at 43%.

“More importantly, these increases happened during South Africa’s most dramatic property boom. The rental market usually sags when prices boom and booms when the house sales market tops out as is currently happening - so we can expect rents to start rising in steady double digits from now on,” he says.

Johannesburg rentals outpaced the other major centres while Cape Town lagged slightly at 8,5% to 133. Pretoria lagged the major centres with a 5% increase to 124.
East London experienced the highest rise to 159 (13%) but this had to be viewed as coming from a low base and actual rents are still below those achieved in the other major centres.

Schaefer says careful buy-to-let investors who have neither over-bought nor over-borrowed will reap the rewards of their patience over the next few years.

“The boom has obscured the fact that property is at its best as a long term, income investment. Net monthly incomes will demonstrate the magical effect of compounding rentals, what Einstein allegedly called the eighth wonder of the world,” Schaefer says.
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