DURBAN - Growth in the South African residential market remains stagnant, with experts predicting no improvement until the final quarter of 2020, when supply is expected to align better with demand.
Ben Shaw, Chief Executive Officer of HouseME, a digital long-term letting platform, said that rental growth across the entire country has been below inflation for most of the year, resulting in real losses for landlords across the country.
"Rental prices have been unable to match inflation as tenants have an abundance of supply to choose from and force prices down due to this choice. In the Western Cape, for example, 57 percent more residential building plans have become available in 2018-19, compared to a more reasonable 11 percent growth in 2017 – a year which saw the market quite stable and prices protected. 23 percent more new flats and townhouses were completed in the first half of 2019 compared to the same period in 2018. Tenants are genuinely spoiled for choice," said Shaw.
Shaw believes that the rental market will continue to see price suppression until Q4 next year. In addition to oversupply, financial pressure is also negatively affecting rental demand as shared communal living remains the norm. Net income levels among residential tenants have stagnated, and with rent and inflation increasing at higher rates than the average income, South Africans are struggling to keep up.
It's a good time for savvy buyers though. "Landlords of bonded investment properties are under pressure to recoup investment value if they cannot service their bonds. This, I believe, along with continuing political turbulence, has resulted in a number of investors choosing to sell, meaning that it is a truly fantastic time to be buying – or renting," said Shaw.