Although buying their own home is a big life goal for most people, many families in South Africa cannot afford to do so at this stage and must live in rented accommodation.
The latest General Household Survey (GHS) conducted by Statistics SA shows that about 3.4million households are in formal rental accommodation and about 1million are in informal rental accommodation.
And these numbers are set to grow as more young people move to South Africa’s urban areas to study or to seek work. Indeed, the GHS shows that new households are being created at the rate of 2.4percent a year, while the rate of population growth is only 1.3percent a year, and about a quarter of all households now consist of only one person, while only 38percent are composed of more than three people.
Add to this the small but steadily increasing number of baby boomers who are selling their family homes as soon as their children move out and opting not to buy again but to rent, and what emerges is a pretty rosy picture for the property investors of today who will be the providers of all sorts of rental accommodation in the future.
Meanwhile, the latest statistics from PayProp contain encouraging news for landlords, who have struggled to achieve much rental or capital growth since 2016. These figures show that the average rental in the second quarter of this year was 3.86percent higher than in the same period of 2018 - and that this growth rate was similar to the 3.85percent achieved in the first quarter.
However, when the statistics are broken down into regions, most saw a higher rate of growth in the second quarter than in the first - the exceptions were the Free State, Gauteng and the Western Cape.
What is more, the average rate of tenant income growth has shot up from 1.06percent a year in 2018 to 3.02percent a year currently, which is much closer to the annual rate of rental growth and, more importantly, the rate of inflation growth. This means that tenants are now less likely to default - even if they are not in a position to withstand inflation-beating rental increases.
Tenant households are spending an average of about 73.5percent of their after-tax incomes on debt repayments, plus rent (compared with 67.1percent in 2015), leaving only 26.5percent for other expenses such as food, school fees and transport, so there is not much room to manoeuvre.
Once again, however, there are regions where the financial health of tenants is better than the national average and the risk to landlords is lowest. These include the Free State, Limpopo, Northern Cape and Western Cape.
When it comes to rentals, North West remains the cheapest region in which to rent, while the Western Cape remains the most expensive.
In other words, while the overall prospects are good, there are many factors that could influence the success of individual investments, and buyers, as well as existing landlords, should always seek the help of professional agents to choose and manage their rental properties.
Berry Everitt is the chief executive of the Chas Everitt International property group.