Pre­to­ria west of­fers im­pres­sive re­turn on rentals for in­vestors

The Star Early Edition - - NEWS - Roy Cokayne

NINE out of the top 20 sub­urbs that of­fer the high­est yield in the coun­try for rental sec­tional ti­tle schemes were in Pre­to­ria, ac­cord­ing to prop­erty spe­cial­ist credit bureau TPN.

Michelle Dick­ens, man­ag­ing di­rec­tor of TPN, said Philip Nel Park in the west of Pre­to­ria had an av­er­age yield of 20.1 per­cent over the past five years.

“With 92.3 per­cent of ten­ants cur­rently in good stand­ing on their rental pay­ments, that is a pretty im­pres­sive re­turn on in­vest­ment,” she said.

Other sub­urbs in the top five, in terms of the high­est yield for rental sec­tional ti­tle schemes, were Kenville in Dur­ban, Avon­dale, in Pre­to­ria and Grassy Park, in Cape Town.

Dick­ens said the high­est yield in terms of rental full ti­tle prop­er­ties was in Cos­mos City in Jo­han­nes­burg, 16.6 per­cent, where 91.2 per­cent of ten­ants were in good stand­ing.

This means those who paid on time, paid in the grace pe­riod and paid late.

The other best per­form­ing sub­urbs in terms of the high­est yield for full ti­tle prop­er­ties were Bridgetown and Fir­grove Ru­ral, in Cape Town, and Thatch­field and East Lynne in Pre­to­ria.

Dick­ens said the lat­est re­search by TPN re­vealed as­tound­ingly high per­for­mance “pock­ets of ex­cel­lence” in the cur­rent rental mar­ket.

She stressed the crit­i­cal im­por­tance for buy-to-let in­vestors to de­ter­mine ex­actly which sub­urbs per­formed the best in terms of av­er­age yield when plan­ning their prop­erty in­vest­ment strat­egy.

“There are 2.1 mil­lion house­holds in for­mal rental ac­com­mo­da­tion in South Africa. Of the 1.4 mil­lion lease agree­ments that TPN pro­files, 22 per­cent pay be­low R3 000 a month, 59 per­cent are in the R3 000 to R7 000 rental bracket and 14 per­cent in the R7 000 to R12 000 bracket. Only 0.5 per­cent pay above R25 000 a month.

“Al­most 80 per­cent of ten­ants pay be­low R7 000 a month. The sweet spot for rental col­lec­tion is the R3 000 to R7 000 bracket, with the most chal­leng­ing ten­ants pay­ing be­low R3 000 a month,” she said.

Dick­ens added that, in spite of prophe­cies of doom in a re­ces­sion, the wis­est op­tion was for po­ten­tial in­vestors to gain in­sight into the mar­ket, to hone in on the pock­ets of ex­cel­lence that ex­isted.

Other fac­tors

She said in­vestors would want to look at the yield in spe­cific ar­eas but other im­por­tant fac­tors also needed to be taken into con­sid­er­a­tion.

These in­cluded the rental pay­ment per­for­mance in that sub­urb, va­cancy rates and prop­erty ex­penses, to­gether with the ra­tio of ten­ants to land­lords in a sub­urb.

Dick­ens said an area where oc­cu­piers were mostly ten­ants did not al­ways hold up as well as ar­eas where a large por­tion of dwellers were home­own­ers.

TPN said in June that va­can­cies in the res­i­den­tial rental prop­erty mar­ket in­creased to 6.62 per­cent in the fourth quar­ter of last year, from 6.53 per­cent in the pre­vi­ous quar­ter, de­spite de­mand for rental prop­er­ties still ex­ceed­ing sup­ply.

It was re­ported in May this year that there had been a grad­ual de­te­ri­o­ra­tion since 2014 in ten­ant pay­ment per­for­mance na­tion­ally, with the per­cent­age of ten­ants “in good stand­ing” with their land­lords reach­ing a multi-year peak of 85.95 per­cent in the third quar­ter of 2014.

This per­cent­age de­clined to 82.77 per­cent by the first quar­ter of this year.

PHOTO: SUP­PLIED

Michelle Dick­ens, man­ag­ing di­rec­tor of TPN, said Philip Nel Park in the west of Pre­to­ria had an av­er­age yield of 20.1 per­cent over the past five years.

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