Saturday, December 15

Check vacancy rates before investing

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"The most important factor is the overall availability of rental property in the area versus demand."

Economic conditions and lifestyle preferences are leading to an increased demand for rental properties, but before investors consider this type of asset, they need to take an area’s vacancy rate into account.

While there are few rental properties that will be occupied 100% of the time, Tobie Fourie, national rentals manager for Chas Everitt International, says most seasoned investors will make allowance for their rental properties to be vacant about 5% of the time.

“At around 5%, there should be steady demand and landlords in the area should be able to achieve moderate annual increases in rent, but when the vacancy rate drops below about 8%, that can become difficult. It may also suggest the area has fallen out of favour with tenants.”

There are, however, factors that can change the vacancy rate in the short or longer-term, Fourie says, adding that the most important is the overall availability of rental property in the area versus demand.

“If there has been overbuilding, for example, the vacancy rate will rise and it will be difficult for landlords to raise rentals until the oversupply is absorbed. But if the local population is expanding faster than the number of units required to provide housing, the vacancy rate will fall and higher rents will become possible.”

Investors should also consider the position of the specific rental property, as a home-to-let in a visible position will generate more inquiries, while the hard-to-find property is likely to stay vacant for longer.

Keeping the property in good condition can also have a significant impact on the vacancy rate, Fourie says. “Tenants don’t only move because of life changes, such as a new job or a new baby. Rental homes need to be well-maintained or any proposed rental increase will swiftly prompt them to move to a newer or better-managed property.”

The unfavourable economic conditions have resulted in a number of single-unit rooms and detached garden cottages becoming available, says HouseMe’s Ben Shaw. “This has been borne out in an increasing number of rentals for less than R5 000 a month across the Western Cape.”

Pet-friendly units in demand

Mant tenants inquire about a property’s pet policies before they are even prepared to view a property, says HouseMe’s Ben Shaw. “Pet-friendly properties have higher chances of being tenanted sooner.” Dogon Properties is also seeing the petfriendly trend, says the agency’s Odette Maartens. “We have many pet-friendly requests, but it’s unfortunately a difficult need to be met in apartment blocks, especially for dogs.” Most of the agency’s tenants, however, are looking for one or two-bedroom apartments with good security and secure parking within the complex, and close to shopping centres and other amenities. For the average working person in Cape Town, the main thing is to avoid traffic congestion, Maartens says. “Quite a large number of people has offices in Cape Town city centre so any area close to the CBD is in high demand, but also more expensive. “The average person, however, cannot always afford these sought-after apartments.”

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