DURBAN - It is not just the demand for residential accommodation that drives the Cape Town rental market, but added economic drivers such as tourism, conventions and events, corporate contracts and semigration according to the Seeff Property Group.
Samuel Seeff, chairman of the group says that despite the challenges experienced over the last year, Cape Town remains the stand-out as the city with the best lifestyle and service delivery, two of the biggest drivers of the demand for rental accommodation.
He said that when there is a degree of economic decline and the residential sales market dips, there is always a rise in demand for rental accommodation. Additionally, we have seen that as an alternative to emigration, there has been an influx into Cape Town from other provinces and these would-be buyers often rent first while they acclimatise to the city before deciding where to buy.
With the election over, it is expected that both tourism and semigration will pick up once more to provide further impetus to the market. The market has been under pressure over the last with stock levels rising while the monthly rentals have come under enormous pressure, but Natalie Muller, rentals manager for Seeff Atlantic Seaboard, Waterfront and City Bowl says that after a period of high escalation, the market needed to take a break.
We are now entering the winter months and a number of Airbnb and holiday rental homes have flooded the market, so there is plenty of stock to come with an influx. Some sellers have also opted to rent out their properties while they wait for the market to improve, having felt the effects of the water restrictions.
What does this mean for landlords?
The market will stabilise, it always does, says Ms Muller. The market has come off a high base, having achieved annual increases of around 10 percent over the prior few years and escalations are now adjusting in line with the CPI.
Atlantic Seaboard and City Bowl
Escalations are down to 4,5 percent-6 percent and yields to around 2 percent-4 percent, but the Atlantic Seaboard and City Bowl remain popular, says Ms Muller.
The average monthly rental for Atlantic Seaboard houses is now at R35,000, 18-20 percent down since last year. Apartment rentals are also down, but still come in at around R18,000 on average given the higher demand from people looking to move closer to the city to save on petrol costs.
Constantiaberg and Southern Suburbs
Sonya Garisch and Jacqui Bush, rental agents with Seeff say it has been a busy year with the traditionally quiet March actually being a record month for the team, although the market has since slowed with the onset of winter.
Most upper end landlords have kept their monthly rentals stable while the mid-range increase has been around 5 percent. High demand properties include gated communities in the rental bracket to R30,000/month, the mid-range of R15,000-R25,000 and realistically priced cottages and flatlets between R8,000-R10,000.
Family houses, secure complexes and student flats remain in demand. Apartments range from R6,000/month for one bedroom and R11,000 for two bedrooms. Townhouses range from R16,000 and houses in the top end areas such as Claremont Upper and Bishopscourt from R25,000-R95,000/month.
Nancy Oeschger, rentals manager for Seeff Blouberg says the area remains popular for its coastal lifestyle, excellent schools, top class amenities and affordability and is attracting tenants from all over including people moving from Johannesburg. It offers many security complexes and family friendly neighbourhoods.
Rental escalations are now at around 5 percent–7 percent, but she recommends that landlords offer flexibility to keep good tenants rather than risk a unit standing vacant given the oversupply of stock including many new developments. Two-bedroomed apartments are always in demand in the R7,500-R8,500/month range and houses from R14,000/month.
Hout Bay and Llandudno
Janine van Heerden, rental manager for Seeff Hout Bay and Llandudno says after rising significantly prior to 2016, rental prices have dropped by an average of 20 percent over the past two years and monthly rentals are now under pressure as there is an oversupply of stock.
An average one-bedroomed flat now rents out for R7,000-R8,500/month and from R9,500-R12,000 for two bedrooms. Family houses in the R20,000-R30,000/month range also remain in demand.
Marinda Uys, Seeff’s group rentals manager for the Winelands/Boland region also reports an oversupply with some properties taking up to three months to rent out and now often renting out for less than the previous tenant paid. Escalations are at of 3 percent-6 percent.
The R7,500-R10,000/month rental range is the most popular. Flats tend to rent out from around R3,500 for a bachelor unit to R7,500 for two bedrooms. Houses start at R7,000 for two bedrooms and from R9,000 for three bedrooms ranging to R15,000 for four bedrooms.
What does Seeff recommend in the current market?
Seeff’s agents recommend that landlords focus on retaining good tenants because it is better to have a good tenant than to sit with an empty unit. A three-month vacant period can be very costly.
Most tenants would prefer to stay and not suffer the disruption and expense of moving and may pay a little more than the market, rather than look elsewhere. Losing them, means you are looking for a new tenant who has more bargaining power.
If a tenant does leave (and they do for many reasons), set the asking rent at a competitive rate in line with the market. Sourcing a new tenant is costly and potentially risky and you may end up with a lower rent in a falling market.