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Good news for tenants: Over supply of rentals

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The residential property market remains flat, with growth predicted only late in 2020.

Experts predict no improvement until the final quarter of 2020, when supply is expected to align better with demand. Ben Shaw, chief executive of HouseME, a digital long-term letting platform, says rental growth across the entire country has been below inflation for most of the year, resulting in real losses for landlords across the country.

“Rents have been unable to match inflation as tenants have an abundance of supply to choose from and can force prices down due to choice.

“In the Western Cape, 57% more residential building plans became available in 2018-19, compared to a more reasonable 11% growth in 2017, a year which saw the market quite stable and prices protected. A total of 23% more new flats and townhouses were completed in the first half of 2019 compared to the same period in 2018.”

Shaw adds: “In addition to oversupply, financial pressure is also negatively affecting rental demand as shared communal living remains the norm.”

Net income levels among residential tenants have stagnated, and with rent and inflation increasing at higher rates than the average income, South Africans are struggling to keep up. It’s a good time for savvy buyers.

“Landlords of bonded investment properties are under pressure to recoup investment value if they can’t service their bonds. This, I believe, along with continuing political turbulence, has resulted in a number of investors choosing to sell, meaning it is a fantastic time to buy or rent.”

Shaw says any form of instability or uncertainty harms long-term investment performance and the current high level of emigration is impacting the market. 

“We have noted an increasing number of rentals retracted by the owner for reason of ‘sale’.” While it appears some buyers believe the market has bottomed out, Shaw believes this is a few months off.

“There are worrying indications that some developments are struggling to find buyers. But it’s not all bad news. Secure village communities, exclusive health or age-constrained developments and coastal town housing will continue to do well in isolated pockets.”

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