Why the buy-to-let market is booming
Because of spiralling costs and fears over maintenance of a property – or even the struggle to get a home loan – more South Africans are opting to rent rather than buy.
In a university town like Grahamstown, rentals are at the core of the property market. A shifting population of both students and academics means that it is easier to rent while you are here, rather than be tied down to ownership.
At the other end of the market, rentals are a great source of income for landlords, and many people who buy do so as an investment – assured of a market where people will be looking to rent.
The PayProp residential Rental Index for 2016 indicates that 77.4 percent of all rentals in the country remain below R7 500 a month. This figure would seem high in a student market, but it indicates that a family with two breadwinners and two children, both at school, would opt to rent rather than be tied down to a monthly bond of R10 000 or more.
“Due to concerns about affordability (in terms of maintenance, municipal rates and the rising repo rate) and difficulties with obtaining a home loan, many South Africans are opting to rent a property and, while there have been rental increases, you can see that the average rental rate is still quite low. PayProp is now also indicating that rates are in a downward cycle,” says Bruce Swain, MD of Leapfrog Property Group.
And what of the rental scene here in Grahamstown?
Jillian Tyson, rentals manager for Grahamstown Properties says students are their client, in the main. They work largely on rentals in Grahamstown West as rentals in the eastern suburbs are mostly done privately. Students might also choose to go to sites such as gumtree to find rooms to rent, or affordable digs by word of mouth and notice boards.
“While students are mostly our clients, we have noticed an increasing number of families over the last couple of years wanting to rent,” says Tyson. What do rentals cost here? “We are looking at between R2 000 and R4 500 per person (for students). Obviously the quality and position come into the equation as well,” she explains.
“You could be looking for a bachelor flat in a complex, or a granny flat in a garden. One thing that is becoming more and more important is wi-fi and if your unit is in one of the blocks that has Resnet, then this is an added bonus for a student. All these factors add to the rent.”
Taking an average rental figure of R5 000 a month, what could you expect to get?
Tyson says for that price you would probably get a twobedroom, two bathroom apartment, probably not too close to campus.
“Over the past few years, there has been a change in the properties that students live in. This has come about through the growth of the number of apartments that have been built.
“We believe that parents would rather have their children living in a secure environment with access control than in a house that is not as secure,” says Tyson.
“That said, we are still renting out houses to groups, but in smaller numbers. This has meant that less desirable homes with fewer extras are not being rented out to students, forcing their owners to reduce their rents and accept families.”
Because this is a university town, do more people rent than own their own homes?
“Even if you include the student community, I wouldn’t say this is the case. While there are a lot of people renting, I still believe that more residents own their homes than rent them,” Tyson says.