Tenants in the Mother city may well be paying more for rental properties than their peers in Johannesburg, but the latter offers buy-to-let investors far better income returns.

That’s according to latest figures from international real estate portal Global Property Guide, which compares buy-to-let returns in 80 countries across the world. The portal places gross rental yields for sectional title properties in Cape Town at an average 4,97%/annum. Buy-to-let investors in Johannesburg, in comparison, are earning nearly double that at an average 8,29%.

Global Property Guide’s average yields are based on upmarket apartments or townhouses typically sized at 120sqm. The reason why Johannesburg investors are ahead in the income yield stakes is because a 120sqm property costs substantially more in Cape Town than in Johannesburg. Gross income yields are equal to total annual rent as a percentage of market value.

According to Global Property Guide, a 120sqm unit in Cape Town will cost around R3,93m while a similar sized unit in Johannesburg will set investors back R1,713m. These units will fetch rentals of an average of R16,290/month and R11,835/month respectively, according to Global Property Guide.

Latest figures from Cape Town-based property economists Rode & Associates confirm that it is markedly more expensive to rent accommodation in Cape Town than in Johannesburg. In fact, tenants will pay 33% more on average to rent an upmarket two-bedroom flat in Cape Town than for the equivalent in Johannesburg, Rode figures reveal.

Pam Golding Properties (PGP) MD for the Western Cape Metro region, Laurie Wener, says demand for upmarket rentals in Cape Town has strengthened noticeably since November last year. That has seen a number of leases signed at record levels in recent months, says Wener.

Some of PGP’s most notable rental deals for 2010 include: Clifton – R120k for a three week let of a bungalow to an overseas visitor; Bishopscourt – R47,600/month for a modern family home; Constantia – R42k/month for a five-bedroomed home in a secure estate with mountain views; Camps Bay – R40k/month for a four-bedroomed home; Newlands – R30k per month for a three-bedroomed family home in a secure complex; Big Bay in Bloubergstrand – R20k for a modern four-bedroomed home in a secure estate. – Joan Muller

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