Rentals are on the rebound in Johannesburg
Right now, many people are choosing to rent rather than to buy – which explains why the residential rental market is booming and Tyson Properties’ Johannesburg has seen its rental book grow by 100 percent in just six months.
According to Chris Tyson, chairperson of Tyson Properties, this growth spurt is expected to continue with rentals expected to increase by another 100 percent over the next year.
“Current economic constraints are impacting first time buyers and middle market buyers, making it difficult to enter and remain in the property market. Many are choosing to rent whilst they ride out this period of uncertainty. Those who are budget conscious are opting for a fixed rental cost rather than a fluctuating bond repayment,” he explains.
Tyson Properties’ Johannesburg director, Francois du Toit, agrees, saying that, for now, there are a relatively large number of rentals available with secure complexes being the most popular. When it comes to location, he says that the rental rebound means that all areas within greater Johannesburg are showing growth.
Sharon Kayise, Tyson Properties’ rental agent in Johannesburg, says that, because the cost of living continues to rise, interest rates may be hiked while inflation remains above seven percent and energy costs eat into disposable income, some people are left with no choice but to rent.
However, for others, this is a positive lifestyle choice. For example, people in their twenties are at the start of their careers and need the flexibility to move where their jobs take them. Empty nesters who no longer need large homes but have yet to decide where they wish to retire to are selling up and renting while they make up their minds. Still others like to live close to where they work and can rent a far better and more suitable property than one for which they would get a home loan approval.
This positive approach to rentals is reflected in recent data published by TPN Credit Bureau for the second quarter of 2022 which showed that tenants are prioritising their payments despite economic challenges. The number of tenants in good standing with their monthly rentals improved from 80.78 percent in the first quarter to 82.22 percent in the second quarter. Researchers expect this to continue throughout 2023.
Kayise admits that there is still a hangover from the pandemic period as people attempt to recover from the long standing economic impacts which have been compounded by present day issues such as load shedding and high fuel prices. This has had a domino effect on South Africa’s property market, turning the sellers’ market of the pandemic period into a buyers’ market.
However, when one door closes, another always opens and Kayise says that this presents exciting opportunities for those in the invest-to-let market which has increased considerably to keep up with demand.
“This is a good investor buyer market because some home owners are under pressure. There is an uptick in investor properties and this trend will continue,” she notes.
Kayise recommends that would-be investors focus on properties priced up to R1.5-million. “The lower the price of the property, the better the return for the landlord / investor. There are more tenants in this price range and it is easier to sell this sort of home down the line.”
Although she says that a wide range of rental properties is on offer in Johannesburg – from lifestyle estates in the suburbs to apartment with prices spanning everything from R6 500 to R55 000 a month. However, she says the rental option is particularly suitable in central locations where estate living is not possible and gyms, restaurants and entertainment are usually close by.
Her tips for both existing and new investors who are looking to invest in properties that they would like to rent out is to prioritise those that already have tenants with good track records.
Where this isn’t possible and new tenants have to be considered, she advises landlords to carefully calculate their expenses for each property in order to arrive at a clear idea of the income needed. This will then cover bond repayments and enable them to benefit from capital growth.
“I also recommend that landlords deal with a professional company that ensures the proper pre-rental checks are done to lower the risk of renting out properties. It is important to put the right tenant in place from the outset. We offer a management service which takes care of receiving rents, paying bills and attending to maintenance. The landlord gets net rental, free of any hassle into their account,” she says.
On the flip side, Kayise’s tips for those wishing to enter the rental market are:
- Be prepared: Get your ‘background checks’ done ahead of time and have your references, copies of pay slips and three months’ bank statements on hand. As rental apartments are in demand, you’ll be one step ahead.
- Do your maths:
- You need to be able to afford your rent so agents will check if you are intending to spend more than a third of your monthly net income on rent.
- Make sure that you have saved enough to cover all upfront costs – including security deposits, the first month’s rent, moving costs etc.
- Beware of rental scams – work with professional agencies.
- Read your lease agreement – and all the fine print.
- Check if the property meets your needs – is it child friendly, is there a cell phone signal and safe parking. Will your furniture fit?
- Make a ‘snag list’ if anything is amiss when you move in and keep everything in writing between you, the agent and landlord. Make sure you treat your rental home as you would your own – you want to, ultimately, get your full deposit back.