As inflation and rising interest rates dim the attraction of residential property purchases, and slowly recovering employment statistics improve demand for formal residential rentals, it appears the worst may be over for South Africa’s rental market.
Having suffered weak demand leading to record vacancies and rock bottom escalation during COVID, rental investors will doubtless welcome this change of tide.
According to Jacqui Savage, National Rentals Manager for the Rawson Property Group, the road ahead is not without a few bumps, however.
“It’s definitely heartening to see the rental market gaining momentum after a long period of stagnation,” she says. “Vacancy levels are recovering nicely, and demand looks set to grow. That said, rising costs are putting increasing pressure on landlords to escalate rentals, while consumer inflation is eating into tenant affordability at the same time.”
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This, she warns, could see an increase in late rental payments and a decline in tenants in good standing – a trend that has already begun, according to the latest TPN Rental Monitor report.
The report shows a small but notable drop in tenants in good standing between Q4 2021 (81.4%) and Q1 2022 (80.78%). The under-R3,000 bracket had the worst decline, with deterioration extending into the R3,000 to R7,000 bracket.
For the first time in seven consecutive quarters, the R7,000 to R12,000 bracket saw no improvement in tenant payment behaviour. The R12,000 – R25,000 bracket, on the other hand, showed continued recovery reaching over 86%, while the R25-000+ bracket breached 80% for the first time in five years.
“There is also concern over the rising prevalence of rental scams,” says Savage. “More and more landlords are getting burned, and not just because of insufficient tenant vetting. Today’s criminals are smart and creative, and can be extremely convincing. It’s really becoming essential to have a seasoned rental professional on your team, properly equipped to spot red flag behaviour and protect you and your investment from unscrupulous con artists.”
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According to Savage, the best way to confirm a rental agent has what it takes to protect your interests is to use a reputable agency, active in your area, with good reviews from current clients.
“It’s also important to confirm that the basic professional requirements are in place,” she says. “Any agent who can’t keep their own Fidelity Fund Certificate up to date, for example, shouldn’t be entrusted with the care of your biggest asset.”
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In terms of rental strategy, Savage says that stability should still be the ultimate priority for landlords in the coming months.
“There is going to be a very careful balance to strike between covering rising costs for landlords and potentially pricing their rental properties out of reach of their target market,” she says. “For now, a willingness to compromise and collaborate with good tenants to improve stability and retention is likely to pay far greater long-term dividends than maximising short-term profit margins.”
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