Cape Town – Those looking to rent aren’t having the best of times in Cape Town. They are competing against often wealthier out-of-towners as well as the lucrative short-term letting market for a home close to work.
And, the chronic shortage of rental stock in and around the city has driven up prices and made the landlord king.
With the latest TPN data for the first quarter of 2017 showing rental escalations in double digits – the only province to show such growth – the disparity between supply and demand is evident, says TPN managing director Michelle Dickens.
The Western Cape saw an 11.85% rental escalation in the first quarter this year over the first quarter last year. Gauteng had only a 5.45% increase.
“In Cape Town, demand for rentals is well in excess of the supply, and because of that landlords can push up their rentals,” she says.
Property management company Trafalgar says they get up to 10 applicants vying for one unit.
“In recent years, rental stock has become difficult to come by in the city bowl, Atlantic seaboard and southern suburbs close to UCT,” says residential letting consultant for Trafalgar, Ahmed Hoosain.
“We get up to 30 people coming for a viewing and about 10 applications for one unit.”
The fact that only a third of viewers apply to rent a unit is partly to do with finances, he says.
“For instance, for a property letting for R12 000 the tenant needs to earn three times the amount to qualify. Some, particularly locals, would rather move out of Cape Town where they may get better value for their money.”
Hoosain says Capetonians are not only competing against other Capetonians for rentals; there is also “a lot of foreign and out-of-town money moving into the city”.
“We have a pressure cooker scenario. In the not-too-distant future, I predict the City Bowl will be like Paris or London where only the super-rich can afford to live. This will have social outcomes in the future, one of them being the loss of local culture in these areas.”
Last year, Numbeo, a database of user-contributed data about cities and countries, revealed that rents in Cape Town were 50.8% higher than in Durban, and 22.69% higher than in Johannesburg.
The advent of Airbnb has also meant that some stock for longer rentals has come off the market with landlords preferring the faster and higher returns of short-term letting. A rise in semigration from other provinces as well as more foreign investors, have contributed to dwindling housing stock.
Surprisingly, despite the high rentals, Capetonians remain the best payers, with few defaulters, says Dickens. This could be driven by the knowledge of how hard it is to find a good property.
“Western Cape landlords are in a comfortable position at the moment. Part of the reason they have had to escalate their rents is because property is that much more expensive and they have to cover their expenses. Having said that, it is in Gauteng where the yields achieved are better than the Western Cape.
"In Gauteng, property is cheaper, so even if rents are lower, a landlord has a better chance of covering his bond than in Cape Town where property prices are so high. Even high rents don’t cover a bond.
“Tenants will not only be paying a high rental in the Western Cape, they will also have to prove that their value as a quality tenant is worth more to the landlord than an escalation in the rent.
“You’ll need to make your landlord so comfortable with you that he or she won’t want to lose you,” says Dickens.
Hoosain says owners who charge high rents can expect a higher turnover of tenants.
* The Independent Property is available every week in the Saturday edition of the Weekend Argus
Independent Property