20 Apr 2007
Port Elizabeth's rental market is booming on the back of out-of-towner demand for accommodation while on contract.
According to Yveline de Bruyn of Just Letting, the friendly city's rental market is flourishing, with professional letting agents currently processing up to 10 more deals a month than they did this time last year. Not only are rental volumes up but values, too, she adds, fueled by steady demand from multinationals and large corporates which are allocating generous accommodation budgets to staff members on contract.
These contract workers hail predominantly from the building and engineering industries, and are coming to Port Elizabeth to work on projects such as the new sports stadium and Coega, she says. "We are experiencing strong demand in the R6 000 to R10 000 category," De Bruyn says, adding that budgets are particularly generous to directors and senior management. This is evidenced by the steady take-up of units at the upper end of the market which, until recently, was relatively dormant.
Local demand for rentals is also strong, she says further, although the interest here is predominantly in the R3 500 to R4 000 price range. The local rental market, although not as vibrant, has also strengthened as a result of last year's interest rate increases and property price growth. These factors together have made home ownership increasingly difficult for low and middle income earners who are being forced to rent because they can no longer afford to buy.
Accommodation in suburbs such as Walmer, Blue Water Bay and Summerstrand is particularly sought-after by young business people chasing units in new developments such as Madison on First and Tippers Creek. These units are commanding good returns, with tenants prepared to pay up to R3 500 for a one bedroom unit if the address is right.
At the luxury end of the market, corporate rentals are hitting record highs. "An older unit in Summerstrand was recently rented out to a couple from Brazil for R16 000 a month. Albeit it is furnished, this is an usually high return and should not be a benchmark for the local market, where the client is essentially the man in the street," she says.
Dave Callaghan, manager of Pam Golding Properties in Port Elizabeth, says both his Seaview and Summerstrand offices are experiencing an upturn in the rental market this year, with enquiries coming in on a daily basis. Interest is strong from newcomers to the area either on contract or wanting to rent for six months until they are ready to purchase their own homes.
They are currently paying between R4 000 and R6 000 a month for a standard three bedroom house in a middle-class area, he says. Beach-front flats are commanding healthy rentals with large, fully furnished, luxury units costing up to R25 000 a month. These tend to be taken by corporate tenants, he says, adding that the average monthly rate for a three-bedroom apartment at the sea comes in at R6 000 to R7 000.
Just a road or two back from the beach, rentals are substantially lower, with the average ranging between R3 500 and R4000 for a similar unit.
Suburbs such as Blue Water Bay, which are close to Coega and offer a seaside lifestyle, are particularly sought-after, although activity has slowed on the back of a shortage of stock in the area, he adds.
Pat Haley of Pat Haley Properties works predominantly in the local market, which she says does not sustain high rentals. Entry level accommodation is to be found in areas such as Port Elizabeth Central, where apartments, depending on their condition, cost from R2 500 a month upwards.
The most expensive property she has on her books is a three bedroom, three bathroom apartment in Humewood with spectacular views of the bay. At R22 000 a month, it is likely to be taken by the corporate sector since most demand among her tenants is for homes in the R3 500 to R5 000 a month price range. Stock levels have taken a pounding, however, on the back of recent investor offloading." "Quite a few investors who were feeling the strain of subsidizing their bonds in the wake of last year's interest rate increases have put their properties on the market, which has removed a fair amount of stock from the local rental pool," she explains.
According to Haley, one third of her rental portfolio comprises properties belonging to ex-patriot South Africans and overseas owners. "A lot of my landlords live and work abroad. They don't want to sell their homes so they are renting them out in their absence, as are foreign owners with local holiday or investment properties." – Ingrid Smit
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