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Tuesday Oct 09, 2018

Economy, spiraling costs, seasonal demand invigorates Cape residential rentals

The Cape residential rentals market is likely to start picking up steam ahead of the new year when many people will start entering the market. Natalie Muller, Sales and Rentals Manager for Seeff Atlantic Seaboard and City Bowl also expects higher demand due to the weak economy and rising costs.

It is cheaper to rent than buy and those looking to cut their household expenses are likely to consider renting now rather than buying, she says. The high traffic volumes in Cape Town and petrol price hikes will also boost rental demand in areas considered to be convenient. The summer months often also coincide with many lease renewals.

Ms Muller says that the demand is coming from a wide range of sources; from ordinary residential tenants looking to renew their leases or to get into the rental market to young professionals starting their articles or a new job who are looking for rentals in the City Bowl, Sea Point and Green Point areas to be close to work. The Atlantic Seaboard lifestyle is also a big driver for rentals as you can for example rent a one-bed apartment in Sea Point for around R12,000/month while a bond repayment would probably cost you around R18,000/month minimum plus the additional costs of ownership such as the monthly property taxes.

The Southern Suburbs and Constantiaberg area is seeing a similar trend with more demand for rentals, but rates are under pressure, says Imtiaz Adam, a rentals agent with Seeff. Students and young professionals look for rentals in the suburbs that flank the M4/Main Road which winds its way to UCT and especially in the areas serviced by the Jammie Shuttle such as Claremont, Rondebosch and so on.

Adam says that while agents expect a busy few months ahead, price counselling remains an important element of a rental agent’s day in the current market. Some landlords are now adjusting their prices, but we especially urge landlords to be very price considered in instances where tenants are looking to renew their leases, he says.

Consumer budgets are under enormous pressure and, rather than looking to upgrade their accommodation, we are seeing many tenants opting to stay put in areas such as Claremont and Rondebosch. In the Plumstead area, the agent recently listed three loft apartments for R7,000/month, but since only one of the units achieved this price, he will now be price counselling the property owners to reduce the rates in line with market trends of around R6,500/month for a one-bed loft apartments

Ms Muller says that there has been a marked decrease in the values being achieved on the Atlantic Seaboard. The rental market has come off a very high base, having achieved annual increases of around 10% and the market is at this stage seeing prices adjusting downward and escalations in line with CPI/inflation rate, thus around the 4% mark.

Rental property owners who want to capitalise on the current market demand should be more flexible, she says. If you find a tenant who has been fully vetted and meets your criteria, be flexible with your terms and offer a longer lease at a lower escalation or even a financial incentive. Times are tough and there is no doubt that there will be a rise in the number of tenant defaults as a result of the continued economic weakness. Thus, she adds, if you find a good tenant, you should hold onto them.

Landlords should also guard against listing with agents who promise high rental rates, it is simply not sustainable in this market, she says. Hire an agent who will manage the lease period, that way you have someone involved to play mediator between you and your tenant when things get frustrating or difficult Make sure you have fully audited ingoing and exiting inspections, so that you have a justified claim against the deposit if a tenant damages your property. Importantly, she recommends that you speak to an agent about the value of your property. Don’t just assume that you will make more money on Airbnb as we have seen that landlords with a good tenant who looks after the property is delivering better returns than a rotation of a number of guests in the season.

Janine van Heerden, Rentals Manager for Seeff Hout Bay says that areas such as Hout Bay and the Southern Suburbs which offer a good mix of compact sectional title and nice family homes will always see good demand for rental accommodation, but here too, she says that rental rates are under pressure. We expect that even if the rental rates go up slightly over the high season summer months, it will in reality still only take them up to the 2016 level.

Suburbs that offer access to top schools such as Constantia, Tokai, Bergvliet, Newlands and surrounds remain busy, says Sonya Garisch and Jacqui Bush. Excess stock has led to a plateau in rental prices, combined with low increases in rental rates, and in some cases no increase at all. We have also seen instances where landlords have decreased their price to hold on to good tenants. Additionally, many properties are not selling and owners are electing to rent them out in the interim.

The agents say that it remains a competitive market for landlords, but if they adapt to the current market, they are still able to earn good rental returns. We have found that many landlords realise that working with skilled area agents is a competitive advantage in a challenging market.

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