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Friday Jun 01, 2018

Slight increase in residential vacancies

The national residential rental property vacancies increased marginally in the first quarter of the year, compared to the previous quarter, with the sub-R3 000-a-month rental category experiencing the largest increase in vacancies.

The latest residential rental quarterly vacancy survey report by the TPN credit bureau revealed that vacancies increased to 5.9 percent from 5.4 percent in the last quarter.

TPN said, at a national level, its survey indicated a rental market where demand outweighed supply, which was predominantly due to the strong market in the Western Cape.

Rentals escalated nationally by 2.61 percent in the same period.

TPN said less pressure might have been expected on landlords to apply rental escalations, because of the 0.25 percentage point reduction in the repo rate by the SA Reserve Bank in March this year.

However, TPN acknowledged the impact of the VAT hike would filter through to both landlords and tenants.

TPN said landlords would be paying more for maintenance, upkeep and levies, while tenants would be under increased financial pressure, making it more difficult for them to absorb an escalation in rental payments.

Vacancies in the subR3 000-a-month rental category increased to 9.6 percent in the first quarter from 4.7 percent in the previous quarter.

TPN said this rental price band experienced more noticeable volatility, compared to the higher priced categories, which could be attributed to higher levels of financial constraints within this segment, particularly during an uncertain economic climate.

However, TPN said the R12 000-plus-a-month category had the highest vacancy rate, which had averaged 12.3 percent for the past two years and was consistently higher than any of the other segments.

Despite the increased vacancy rate in the subR3 000-a-month price band, it had been the strongest category for the past three consecutive quarters in terms of the market strength index, despite cooling from 64.4 percent in the fourth quarter of last year to 61 percent in the first quarter of this year.

TPN reported a marginal dip in the national market strength to 58.4 percent in the first quarter from 59.5 percent in the previous quarter.

But TPN stressed this was not necessarily alarming, because it did not result from weaker demand, but a slightly higher increase in the supply rating than the demand rating.

"The fact that both supply and demand ratings are increasing should lead one to believe this points to a somewhat more active market in general, " it said.

TPN said it was not a surprise that the vacancy rate for the Western Province remained the lowest at 3.6 percent in the first quarter, with the Eastern Cape at 5.4 percent, Gauteng at 6 percent and KwaZulu-Natal at 8.9 percent.

It said the Western Cape had the highest market strength rating by region at 71 percent, a position it has held since the inception of the TPN vacancy survey in the first quarter of 2016.

However, TPN said the Western Cape had come off a very high base of 86 percent in the first quarter of 2016.

Gauteng had the lowest provincial market strength rating in the first quarter at 51 percent and has been hovering around this level for some time.

But TPN stressed this was not necessarily a bad thing, because it merely pointed to a market segment that was in equilibrium and a market where the level of demand was satisfied by the level of supply.

Roy Cokayne
Business Report

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