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Positive forecast for rental market

17 May 2013

A recent research survey undertaken by Torus Capital outlines a positive forecast for the property rental industry in South Africa for 2013 and beyond. Interestingly, the residential property rental market shows potential for positive growth, somewhat at odds with the current tough economic climate.

Interestingly, the residential property rental market shows potential for positive growth, somewhat at odds with the current tough economic climate.

Martin Goodman, Director of Torus Capital, a short-term insurance facility offering niche products that are geared towards specific markets, believes that there has never been a better time to be in the residential rental market.

He says the industry is showing considerable growth, which predictions indicate will continue.

The survey, targeted at those in the property sector, aimed to identify trends in the market, and to understand the challenges faced by those in the industry in the light of those trends.

Unsurprisingly, the resultant forecast for the residential property market in 2013 predicted considerable growth, with 85 percent of respondents echoing Goodman’s confidence that the industry would continue to expand.

This statistic is, no doubt, informed largely by the current state of rental stock in South Africa, which 82 percent of respondents indicated does not meet the current demand – good news for landlords and rental agents, or those thinking of getting into the industry.

While the rental market is booming, it has to face up to challenges nonetheless. Eighty-eight percent of respondents were of the opinion that the cost of living is the factor that will most negatively impact the industry, followed by electricity price hikes (61 percent), inflation (50 percent), retrenchment (45 percent), rates and taxes (42 percent) and market evaluation (18 percent). 

However, it seems that the above-listed factors have more of an impact on property owners as opposed to those who choose to rent. An overwhelming 60 percent of respondents indicated that a considerable number of property owners have sold their properties in order to rent as a result of the challenging economic climate.

In the midst of the demand for residential rental space, Torus Capital was interested to note what the biggest challenges are that landlords and rental agents face in managing rental properties. The survey results suggested that the most frequently occurring challenge is damages to property (65 percent), followed by tenants absconding (43 percent) and evictions (43 percent). Deposit disputes (38 percent) and legal costs (18 percent) were also listed as difficulties likely to arise.

Underlining the above statistics, a mere three percent of respondents said that the rental deposit always covers damages to property.

Interestingly, while the industry is booming and there is significant scope for growth, the survey highlighted that the majority of agents’ time is taken up by administration, leaving them little time to grow their property portfolios, to market their businesses or better service their existing clients. In- and out-inspections account for 72 percent of this admin, followed by maintenance (62 percent), vetting of potential tenants (40 percent), lease renewals (34 percent), legal procedures (31 percent), evictions (29 percent), and deposit disputes (24 percent).

Good news for all those in the residential property rental industry is that Torus Capital has just launched Rentshield, a brand new, ‘zero deposit’ tool that takes care of all the legwork that comes with renting property, giving the agent or landlord the time to better manage and grow their property portfolios, protecting them against the risks associated with letting property.

Rentshield alleviates the need for a tenant’s deposit and protects the landlord far better than a traditional deposit would. Fifty-five percent of the survey respondents indicated that they would be interested in a product that allowed them to offer tenants ‘zero deposit’, as 39 percent of respondents found that a hefty deposit acted as a deterrent to potential tenants.

At a time when there is clearly tremendous potential for growth in the residential property rental market, the introduction of such an innovative property letting management tool has the potential to significantly impact the industry.

If the current economic climate teaches us anything, it is the importance of managing our finances and investments with the utmost efficiency, says Goodman. “There is no doubt that the potential exists for South Africans to capitalise on the current and impending growth in the property market, and we are happy to provide them with the tools to do so.” 

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