|Durban’s residential letting market in the under R3 000 monthly rental category is suffering its worst ever shortage of stock and letting agents expect the trend under the hammer of rising interest rates to deteriorate further.|
A survey by the Property Guide this week established the most severely stock starved areas were those surrounding the central business district, and particularly in the popular lower Morningside area. One local agent reported receiving up to 30 calls a working day.
Acutts, Maxprop, RE/MAX Address, Trafalgar and Wakefields Property Management Services all report the demand under R3 000 as huge and growing. Wakefields, enabled by a property portfolio of large apartment blocks, was to some degree meeting the demand. Other agencies were struggling.
Rental requirements are also strong for houses and homes in security estates up to R4 500, depending on areas, with stock generally in short supply particularly in Pinetown and Amanzimtoti where Dalene Anderson of Acutts Amanzimtoti Coastal, says shortages exist up to R6 500. Ironically, unlike Pinetown, ‘Toti supports a surplus of flats in the letting range of R2 8000 to R3 500.
Adrienne Douglas who manages Maxprop’s 700 unit rental pool puts Pinetown’s current rentals between R2 500 and R2 800 for one bed apartments and R2 800 to R3 200 for two bed units, both of which are in short supply as are houses which range between R3 800 to R4 500.
With rental demand having heightened in recent months there is little doubt the trend is interest rate driven, but letting agents point out that uncertainty on future rate increases is also directing the more cautious away from purchasing and into renting. Other factors include social issues, such as divorce; the high growth rate in the number of financially enabled emergent tenants wanting to live closer to the CBD; reduced affordability to purchase as a result of property price growth; unabated urbanisation and growth in the number of CBD workers from African countries, which, says Trafalgar’s Neville Schaefer, accounts for up to 70 percent of CBD rental accommodation.
The virtual lack of newly built affordable stock or encouragement toward further creation is expected by Wakefields Andrew Foxcroft to exacerbate the situation. Under the current situation Foxcroft is projecting an annual 15 percent increase in rentals for the next four years in affordable rentals and annual increases of around five percent in the upper end.
But it’s not all gloom in the luxury letting market. The higher interest rates have also coaxed many aspirant top-end buyers away from purchasing and into renting. Julie Pillay, letting manger of Lighthouse Properties in Umhlanga reports a marked increase in demand for Umhlanga beachfront apartments with tenants attracted by monthly rentals of R10 000 compared to purchase price repayments double the amount on a similar apartment. Pillay’s good stock supply of beachfront apartments a few months ago has been whittled away with the support of negotiable landlords. New listings, she says are “going quickly.”
The higher take-up is in keeping with seasonal demand, but far higher this year. The trend is also confirmed by Renee Willemse, letting manager of Acutts who also believes it mainly interest rate driven.
But while Umhlanga beachfront apartments carry high favour a few kilometres inland around the Gateway Shopping Centre area the vacancy level spun along by the few years of huge investor activity and culminating in the completion of new developments and high asking rentals continues to grow, according to Foxcroft who says stubborn landlords are at serious risk of not attracting tenants.
Similarly rentals in the Durban Point waterfront are also not yet reflecting the long-term potential.
Schaefer says investors with properties in the area for renting are currently experiencing slow up-takes and are also lowering initial asking prices in a bid to attract tenants.
He said the noise arising from construction projects lent an “air of chaos” to the area that was deterring tenants from moving into the waterfront. “Most prospective tenants have commented that they would rather wait until the area and facilities have been completed. Thereafter, the waterfront will become a highly desirable suburb in which to live,” Schaefer said.
One positive factor came from the significant volume of enquiries regarding holiday accommodation, with tourists seeking to rent apartments in the waterfront during the key festival periods.
“Most owners want unrealistic rentals due to high bond repayments, while owners are experiencing problems securing occupation when builders are behind schedule,” Schaefer said.
However, he believed investors had bought properties off-plan for resale on completion and there was a groundswell developing for this type of sale. This promised a potentially viable letting market into the future.