Weekend Argus (Saturday Edition)
Jekyll and Hyde rental market facing investors
THE national rental market is still a mixed bag with the forecast for 2018 holding both good and bad prospects.
Although rentals are expected to rise slowly as the challenges of home affordability and tighter lending criteria increase, it’s a doubleedged sword as the market will also come under increasing pressure from factors like declining disposable income levels.
This is according to Lew Geffen, chairman of Sotheby’s International Realty, who says possible tax hikes this year would exacerbate the situation.
“A glimmer of hope was the change in ANC leadership in December and the positive response of the rand, but this is only cause for cautious optimism as no real impact will be felt in the market until a Jacob Zuma exit strategy and date have been announced.”
The performance of rental markets in the provinces varied considerably last year due to additional influencing factors, says Johette Smuts, head of data and analytics at Payrop. Rent levels in provinces strongly supported by mining, for example, can be more volatile as they are notably affected by international commodity price movement – and perhaps more so by overseas investors’ decisions.
“In 2017, five of the nine provinces saw a reduction in the rental growth rate, with a flagging Limpopo dampening the national figure. North West, also a mining area, bounced back recently after very low growth the previous two years. Gauteng and Western Cape, which have shown high, more consistent growth, are again in first and third place respectively, as they were the previous two years.”
Market performance has also varied considerably between suburbs, especially in major metros, and most of the markets shifts seen last year are expected to continue.
The southern suburbs, Noordhoek, and False Bay rental markets have remained fairly stable, but Lorraine Dellbridge, Lew Geffen rentals manager in these areas, says there has been a reaction to the prevailing climate, especially with the deepening water crisis dramatically slowing semigration to the Western Cape.
“There has been a notable increase in stock on the mar- ket, especially in middle areas. At the top end of the market landlords have begun to lower their asking prices after homes stood vacant for months. Prices in the Fish Hoek area did see significant increases, particularly in estates.
“We have had inquiries from foreign investors this year, but with the water situation it is likely we will begin to see fewer foreign tenants.”
Even though the rental market on the coastal strip has retained considerable strength, Lisa Hendricks, Dellbridge’s colleague on the Atlantic Seaboard, says one reason is that landlords have been more open to negotiation, which has resulted in stable rental prices across the Atlantic Seaboard.
She says: “Unfortunately, the positive sentiment and boost in investor confidence after the election of ANC president Cyril Ramaphosa is being off-set by the severe drought. We are now starting to see many prospective tenants from abroad and across South Africa opting to move to Gauteng instead of investing here.”
Shaun Groves, rental specialist for Lew Geffen Sotheby’s International Realty in Gauteng, says there has been an increase in demand in recent months, particularly at the top end of the market.