Cape rental properties remain in great demand
Although the return on property rental showed only a marginal increase across South Africa, demand for property in most areas of Cape Town has remained high.
Last week PayProp, a rental transaction processor, released its rental index for the last quarter of last year.
It showed rental returns stagnated while municipal rates rocketed and municipalities were making it increasingly difficult for landlords to invest in the property market.
During last year's first quarter the index data showed Mpumalanga to have the highest rental income followed by Limpopo. Gauteng was third followed by KwaZulu- Natal. The Western Cape came in at number five while North West was lowest.
Louw Liebenberg, PayProp chief executive of marketing and sales, said with rent income increasing at less than inflation, and with the expected tolling of highways and several large construction projects in major centres set to change the rent environment, landlords were under a lot of pressure.
"Overall rental growth is heading up again, showing growth of 4.5 percent in December after reaching a low of an increase of 3.9 percent in September."
Mike Schüssler, chief economist at economists.co.za, said that, using Absa's medium house prices, the net rental return alone on an averagesized house was only 4 percent last December.
"Using this method it is clear that landlords could have made more money by keeping their money in the bank. This would also indicate that the economic motivation for buying houses (to let) is not very strong."
Ian Slot, managing director of Seeff Atlantic Seaboard and City Bowl, said the firm had seen significant growth in its management business.
"Economic uncertainty appears to play a big part in deterring tenants from entering into the financial commitment of house buying as it is easier to downgrade when renting.
"Escalation rates have remained on the conservative side at between 5 percent and 7 percent on average, but this has in a large part been moderated by the security of long-term tenants of good financial standing."
Jules Arnott, Seeff 's CBD rentals specialist, said that rental take-up in the lower end of the market was driven by young professionals either starting in new jobs or looking to move to the central city area.
Glenda Taylor, rentals principal for Greeff Properties, said revenues for the last quarter were up by 112 percent compared to the same period in 2011.
"The increase is due to the current high demand for rentals across the property spectrum in the southern suburbs." Taylor added that the greatest demand was for security estates and family homes near schools and that flats or homes near universities were always in high demand from October to March, as parents sought accommodation for their student children.
"We have found a substantial increase in enquiries from returning expatriates leaving the financially distressed euro zone in search of greener pastures back home."
Dexter Leite, Pam Golding Properties' rental manager for the Cape metropole, said there was a demand from certain rental categories.
He said the firm's figures had averaged about 6.5 percent.
Warren Leslie, RE/MAX Properties resident agent for Bloubergstrand, said stock was scarce and prices on the rise. "Rental properties don't stand empty for long and if they do, owners need to check on the condition."