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Monday Dec 12, 2011

Residential rental income grows 6.6%

Average residential rental income in South Africa grew by 6.6 percent in the past 12 months, slightly more than the 6.1 percent increase in inflation and bank saving rates of 5.5 percent in the same period, according to the newly launched Payprop rental index.

Mike Schussler, an economist and developer of the index, said on Friday the rental income return in the past year was "fair" in the current economic conditions.

Schussler added that Payprop residential property rental information for the formal sector showed rentals were not excessive and seemed to take note of prevailing economic factors, such as inflation and pay increases.

Payprop said national average rentals grew to R5 116 at the end of last month from R4 797 a year ago.

Rent excludes water and electricity payments and levies but typically includes sewerage and property rates that owners have to pay.

The average formal sector salary last month was estimated to be R13 194 a month compared with R12 272 a year ago, with rent as a percentage of total monthly salary remaining close to 39 percent of overall individual earnings.

Year-on-year rental price inflation over the past year reached a low of 4.1 percent in June, but the rate of increase has been rising since then and rentals were now 6.6 percent higher than a year ago.

Schussler attributed the high base in the middle of last year to the soccer World Cup rentals.

"Locals seem to have believed that their own income would increase quicker and therefore allowed themselves to sign higher rental agreements at that time."

However, Schussler said the increase in yield did slow down after the good growth in rental income during the tournament, with rentals in some provinces even showing significant decreases in the aftermath of the World Cup.

Louw Liebenberg, the chief executive of marketing and sales at Payprop, said that the new rental property research tool tracked a series of indices from real time transaction data to provide a comprehensive view of the state of the market for residential rentals in the country.

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