JOHANNESBURG – Although rental demand rises during an economic decline, rental rates come under pressure. This means that landlords will need to relook their rental price expectations.
Seeff provides a few recession tips for landlords:
However frustrating the economic climate may be, it is important to consider that it is better to fill your property at a lower rental than to let it stand empty. Your profit margin may be a bit lower and while not the ideal position that you would want to be in, at least you are still earning rental returns
An important consequence of a weak economy is that it puts pressure on household budgets and the amount that they can afford to pay for a rental house. There is little to gain by a landlord who sticks to a high rental rate or escalations that are out of step with the economy as this may prove unsustainable.
The likely outcome of sticking to high rental rates or hiking your rate by an above-inflation escalation is that you will end up with tenants who are unable to continue paying the high rental amount. Once a tenant goes into arrears, it often becomes very difficult to recover from that.