PRETORIA - Michelle Dickens, managing director of TPN, said Philip Nel Park in the west of Pretoria had an average yield of 20.1% over the past five years.
“With 92.3% of tenants currently in good standing on their rental payments, that is a pretty impressive return on investment,” she said.
Other suburbs in the top five, in terms of the highest yield for rental sectional title schemes, were Kenville in Durban, Avondale, in Pretoria and Grassy Park, in Cape Town.
Dickens said the highest yield in terms of rental full title properties was in Cosmos City in Johannesburg, 16.6 percent, where 91.2% of tenants were in good standing.
This means those who paid on time, paid in the grace period and paid late.
The other best performing suburbs in terms of the highest yield for full title properties were Bridgetown and Firgrove Rural, in Cape Town, and Thatchfield and East Lynne in Pretoria.
Dickens said the latest research by TPN revealed astoundingly high performance “pockets of excellence” in the current rental market.
She stressed the critical importance for buy-to-let investors to determine exactly which suburbs performed the best in terms of average yield when planning their property investment strategy.
“There are 2.1 million households in formal rental accommodation in South Africa. Of the 1.4 million lease agreements that TPN profiles, 22% pay below R3 000 a month, 59 percent are in the R3 000 to R7 000 rental bracket and 14% in the R7 000 to R12 000 bracket. Only 0.5% pay above R25 000 a month.
“Almost 80% of tenants pay below R7 000 a month. The sweet spot for rental collection is the R3 000 to R7 000 bracket, with the most challenging tenants paying below R3 000 a month,” she said.
Dickens added that, in spite of prophecies of doom in a recession, the wisest option was for potential investors to gain insight into the market, to hone in on the pockets of excellence that existed.
Other factors
She said investors would want to look at the yield in specific areas but other important factors also needed to be taken into consideration.
These included the rental payment performance in that suburb, vacancy rates and property expenses, together with the ratio of tenants to landlords in a suburb.
Dickens said an area where occupiers were mostly tenants did not always hold up as well as areas where a large portion of dwellers were homeowners.
TPN said in June that vacancies in the residential rental property market increased to 6.62 percent in the fourth quarter of last year, from 6.53 percent in the previous quarter, despite demand for rental properties still exceeding supply.
It was reported in May this year that there had been a gradual deterioration since 2014 in tenant payment performance nationally, with the percentage of tenants “in good standing” with their landlords reaching a multi-year peak of 85.95 percent in the third quarter of 2014.
This percentage declined to 82.77% by the first quarter of this year.