Estate agents say property rentals are being pushed up by the shortage of new stock, lack of mortgage finance and the lack of buy-to-let investors.
Catherine Cockcroft says right now, there are no better property investments than the sectional title sector. According to the recent Absa report, sectional title properties were reported to be faring best pricewise.
Tony Clarke, managing director of Rawson Properties points out that since the passing of the National Credit Act (NCA) in 2007, would-be buyers are battling to secure home loans.
He says there are very few buy-to-let investors returning to the market under the current operating conditions.
The situation in sectional title properties is not different to what Clarke mentions, says Catherine Cockcroft, sales manager of Propell, the levy funding and collection company.
While the current situation will be welcomed by landlords it carries with it the danger that the proportion of tenants in sectional title schemes will rise exponentially, she says.
She explains that Propell’s experience has been that in many schemes with a high percentage of tenants, the upkeep of the units and the general conduct all too often are compromised.
When Propell is commissioned to assist projects in distress, serious financial problems often go hand in hand with equally serious tenant issues.
Cockcroft says in South Africa, buy-to-rent investors leave the responsibility of tenants to the trustees, the managing agent or the rental agent.
The Sectional Title Act 95 of 1986, which is binding on the body corporate, owners of sections and any person occupying a section, and the Prescribed Management Rules obligate owners to ensure that conduct and behaviour guidelines are complied with.
The owners of the section are also responsible in terms of the Rental Housing Act for attaching a copy of the scheme’s rules to the lease agreement to ensure that the tenants are made aware of them and where tenants disregard these rules, the owner will ultimately be held responsible, she says.
“With steady increases in the number of tenants in sectional title properties, trustees should ensure that the rules deal with potential issues related to security and overcrowding.”
These problems crop up regularly in multi-tenant schemes where control has grown lax.
She says right now, there are no better property investments than the sectional title sector. According to the recent Absa report, sectional title properties were reported to be faring best pricewise.
Banks’ strict lending policies have no doubt created a strong demand in areas such as Fourways in Johannesburg.
Dieter Harck, broker and owner of RE/MAX One Hundred operating in Fourways and surrounding areas says many people who cannot afford to buy have no choice but to rent.
Harck says although there has been a marked increase in buyers’ interest in the property market, the high levels of debt-to-income ratios among consumers means that many have been unable to meet the necessary lending requirements laid out by the NCA.
“While this has affected property sales, it has also led to a healthy demand in the rental market.”
Harck notes that while the interest rates have remained low and steady since November 2010 and if they do increase as predicted, the bond finance costs for many landlords would also increase.
“This coupled with demand outstripping supply will inevitably lead to rental prices being hiked by the landlords in the near future,” he says.
The high demand in the rental market in Fourways has led to a lack of movement as many tenants are holding onto their rental properties and renewing leases instead of moving.
Rental property is in demand and will continue to be that way for some time.
Investors with buy-to-let portfolios will be able to capitalise on the current market conditions and see good returns on their investments, he says.
Harck says that in the Fourways area the general rental demand is for properties that fall within the R5 000 to R8 000 per month range, with the greatest demand for those renting for between R5 000 and R6 500 per month, which are usually one or two-bedroom sectional title units.
“The next six months will follow a very similar pattern as the previous six months in terms of rental market activity.”
Demand for rental houses in Fourways priced between R10 000 and R15 000 has also grown.
“The high demand for rental property within a specific range means we have seen a shortage of property that is available to meet the demand.”
He says there have been no new developments in the area for a while which has further contributed to the shortage of rental stock.
The high demand in the rental market in Fourways has led to a lack of movement as many tenants are holding onto their rental properties and renewing leases instead of moving.
He says there has been an interesting trend in the area where large numbers of young professionals that work within the Sandton CBD are renting properties in the Fourways region.
Fourways is ideally located and rental prices are lower than one would expect to pay living close to Sandton’s financial hub.
RE/MAX One Hundred has concluded an average of over 100 rental deals per year over the past four years with an annual rental value of approximately R6.9 million on average, he adds. – Denise Mhlanga
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