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Tenants expected to dig deeper for rentals

By Rianette Jansen van Vuren

TENANTS can expect to dig deeper into their pockets the next 12 to 18 months with rentals on the rise and a shortage of rental stock developing in many areas. This is according to Andrew Schaefer, managing director of the Trafalgar Property Group. “This is particularly true in the gated communities and sectional title complexes. The strongest demand in the Durban office is for two-bedroom units around the R4 500 a month and below price range, and insufficient stock is providing further support for rental growth,” Schaefer added.

There has also been a notable resistance to rentals above R6 000 per month in the market, according to Schaefer.

Schaefer predicted the return to pre-recession rental increase levels of about 10 per cent last year, will continue

 

The rise in demand is being driven by a number of factors said Schaefer. He supported the view that as SA’s population gets younger, it is increasingly joining the mindset of the Europeans, which is towards flexibility and liquidity, enabling them to travel and follow job opportunities, rather than be tied down by mortgages.

Maxprop Umhlanga’s rental agents, Angus Halo, concurred. “The buying age is increasing as younger people are finding it harder to get finance. Owners of rental properties are needing to recover more from rentals, levies, rates and bonds, as most landlords cannot afford to pay these, which in turn, creates a shortage of suitable stock, which then drives the prices upward,” Halo added.

Schaefer added that in a few cases, agencies are witnessing younger people renting in more expensive trendy areas, and buying in areas where they can afford as an investment. Trafalgar’s managed rental pool of about 8 000 units across SA bears this out with areas such as Berea receiving the highest level of enquiries. Research has further backed this by the fact that the age of the first-time homebuyer has risen. This means people are waiting longer to move into the home-ownership market and renting is the preferred option for younger families and individuals.

The slowdown in supply of new affordable homes onto the market, rising building costs and a decline of 13 per cent in the number of new plans being passed this year, will contribute to this trend. “Bearing in mind that we still have a slow economy, that is not picking up as quickly as people thought it would, stricter terms are still in place by the banks, which makes the pre-recession affordability scales not achievable. There are also concerns from potential buyers with regards to crime, electricity increase and rates,” Maxprop’s Halo added. “Student accommodation in the Durban inner city, Albert Park and Berea areas have also been over-traded and we are beginning to see supply exceeding demand here, which will lead to softer returns and better opportunities for students.

“Generally, however, the shortage of affordable houses to buy is a definite driver for the rental market,” commented Schaefer.

“Current low interest rates and the move of mortgage lenders, like SA home loans, into the sector will have a positive impact on affordability. However, as prices inevitably rise, the pressure on rentals will continue and, in my opinion, is here to stay,” Schaefer concluded.

Article in the Northglen News – 31 May 2013 pg. 15

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