An increase in monthly rents and demand is expected in upcoming months across the country
Western Cape tenants are forking out an average of R9 000 a month in rent, making the province the most expensive in which to rent. This is the sad reality for many residents who, already, are forced to rent as they cannot afford to buy property in the province.
Even worse is the fact rents throughout the country will probably increase in coming months. The PayProp Rental Index for the first three months of this year records the average rent in the Western Cape to be R9 030, a figure much higher than the national average of R7 551 a month.
Monthly rents in Gauteng, KwaZulu-Natal and the Northern Cape are also higher than the national average at R8 000, R7 975, and R7 817 respectively. By comparison, the average monthly rentals for the remaining provinces are:
- North West Province: R5 031
- Eastern Cape: R5 694
- Free State: R6 054
- Limpopo: R7 117
- Mpumalanga: R7 298
Most tenants in the Western Cape (30%), however, are paying rents in the R5 000 to R7 500 a month band, the report states, adding: “More than 30% of rentals in the province are priced above R10 000, and more than 11% at above R15 000 – the highest percentage in this band of all provinces.”
Tenants should still brace themselves for higher rents in the coming months. The final three months of 2018 (Q4) brought the first uptick in the national rental growth rate in two years.
The rate was 4.1%, an increase from 3.3% in Q3. The six consecutive quarters before that recorded negative growth, the PayProp Index shows.
Explaining this, PayProp head of data and analytics head Johette Smuts says the lead up to the 2019 general election saw a lot of uncertainty and volatility and this affected property prices.
And although the elections are now over, the ruling party still has to “take a meaningful stand” against corruption and failing state-owned enterprises, as well as clarify its plans around land reform and economic growth.
“Generally, uncertainty decreases consumer confidence, which could leave property buyers reluctant to commit in coming months, effectively dampening demand and putting downward pressure on prices…
“Meanwhile, all these prospective buyers need to live somewhere, and they’ll most likely be forced to rent a property, thus increasing demand for rental properties and pushing up prices.”
Despite the challenges experienced over the past year, Cape Town remains the stand-out as the city with the best lifestyle and service delivery, two of the biggest drivers of the demand for rental accommodation, says Seeff chairperson Samuel Seeff.
He adds that when there is a degree of economic decline and the residential sales market dips, there is always a rise in demand for rental accommodation.
“Additionally, we have seen as an alternative to emigration, there has been an influx into Cape Town from other provinces and these would-be buyers often rent first while they acclimatise to the city before deciding where to buy.”
While this may be welcome news for landlords from a rental income perspective, the FNB Property Barometer for June shows the first three months of the year saw a “solid” increase in the volume of private sector-financed residential buildings completions, particularly the supply/completion of flats and townhouses.
This volume was “exceptionally strong” up by 90.6%. “Against this backdrop, flat vacancies are estimated to be on the rise, which in turn has kept a lid on rental inflation…”