The lack of new housing stock coming into the market is reportedly driving growth of and pushing rentals up in the residential market.
Clarke says the lack of new stock coming onto the market as a result of developers being unable to get finance has steadily increased the stock shortages.
Tony Clarke, managing director of Rawson Properties says rental income at his agency increased by 700 percent in the last ten years and in the last financial year the increase was just over 30 percent.
Clarke says there are reasons behind the significant rent rises being experienced in the South African residential property market.
These include the fact that in the post-National Credit Act and recession era, mortgage bond finance has been cut by over 45 percent making the purchase of a new home difficult for many people.
As a result, he says those who cannot afford to buy rent.
“Buy-to-let investors making the most of the low interest rate and properly gearing the purchase have been active in the market.”
This he says is despite the need in many cases to subsidise the rents and rental amounts no longer increasing at their former high annual rates.
Most importantly, Clarke says the lack of new stock coming onto the market as a result of developers being unable to get finance has steadily increased stock shortages.
Currently, unsold development stock is still coming onto the rental market but this source of rental accommodation will also run dry exacerbating the current shortages of accommodation.
At least 60 percent of families in Mitchells Plain in the Western Cape has one or more relatives or friends lodging with them, he says.
“The demand for rental property has also been boosted by political uncertainty with some white South Africans aged below 30 years no longer prepared to commit to a long term home loan.”
They fear that the country may go to ANCYL route and adopt nationalisation and other policies to free enterprise and wealth creation, he says.
He adds that ongoing rent increases can be relied on even though the annual increases are likely to be lower in the near recessionary conditions that now prevail and those administering rented property are assured of a good future. – Denise Mhlanga
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