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Western Cape comes out tops for renting

Private Property South Africa
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Western Cape comes out tops for renting

Last year saw the national average year-on-year (YoY) rental growth rate plummet from 6.4% in 2017 to just 3.9% at the end of 2018, however not all markets performed equally with some showing more resilience to the prevailing economic climate and shifting market conditions than others.

Chris Cilliers, CEO and Principal for Lew Geffen Sotheby’s International Realty in the Winelands says: “It was a tough year with inflation consistently outperforming growth in this sector and the old adage, ‘the bigger they are, the harder they fall’ wasn’t far off the mark for some areas.

“A case in point is the Western Cape which, after four consecutive quarters of double digit year-on-year growth in 2017, realised lowest growth figures since the launch of the Payrpop Rental Index in 2012, with a low of 3.96% in Q4.

“However, despite this notable decline, the province still managed to achieve the highest average rental during the year which, at R9124, was 18% higher than the national average and R1000 (12%) more than the runner-up, Gauteng.

“And, although the Western Cape’s average rental price dipped to R9030 in first quarter of 2019, it retained its percentage lead over its closest rival and the national average and also has the highest percentage (11%) of rental properties in the R15 000 plus price band.”

View property to rent in the Western Cape here

“Last year, several factors contributed to the steady decline of the rental market, including slowing semigration and the reluctance of landlords to adjust their price expectations, especially in the higher price bands which continue to be subdued by a growing stock surplus,” says Cilliers.

“Owners are understandably frustrated that they cannot achieve the same rental prices they did two years ago but in the current market, increasingly well-informed tenants have more choice than they have had in almost a decade and are not averse to negotiating a better rental.”

Cilliers adds that despite the fact that Cape Town has the lowest percentage of risky tenants and the second highest credit score, landlords are also faced with a growing risk of delinquency as consumer inflation and a dwindling economy continue to put the squeeze tenants.

View homes for rent in Cape Town

“Net income levels increased by only 1.56% between Q4 2017 and Q4 2018, whilst food, petrol and rental prices increased by considerably more.”.

Experts are cautiously optimistic about an uptick in rental growth later this year, but Cilliers cautions that recovery will be slow and won’t happen overnight.

“There are still solid returns to be made in the rental market, but landlords have to be realistic and realise that its ultimately far more costly to have an empty property for months on end than a quality tenant at a slightly lower rental.

She points out that the fact that pricing plays a critical role in even the most resilient of markets further emphasises the importance of correctly positioning a property in the market to secure quality tenants and maximise returns.

“It’s essential that potential investors and landlords do their homework as a level of shrewdness is required to reap the best rewards. There are two key factors that will determine short and long-term returns right from the start, the first being to avoid over-capitalising on upgrades and renovations and then it’s crucial to determine a reasonable yet competitive monthly rental.”

“It’s equally important to be negotiable on rentals and annual increases as creditworthy tenants who pay on time and look after your property are not always easy to come by these days. “

Cilliers concludes: “Knowing what drives supply and demand of rental stock in your province and your area is critical when looking at the bigger picture as it will allow you to position your property within the market.

“Ultimately, a well-priced home in sought-after area, especially those in close proximity to amenities like good schools, will always find a tenant.”

Explore neighbourhoods mentioned in this article

Cape Town City Bowl
Hip and Happening Hotspot
Living in the CBD of Cape Town is unlike any other city centre. Table Mountain, Lions Head and Signal Hill cradle the City Centre, with mountain hikes and forests in easy access and it is within minutes’ drive to some of the world’s best beaches. Depending on which area in the city you live, the housing arrangements can vary from large leafy houses in Oranjezicht, to small studio apartments in the City Centre. Living in the CBD of Cape Town gives the best of both worlds as you're in close proximity to all amenities, as well as have nature on your doorstep.
Cape Town Southern Suburbs
Affluent Village Feel
The Southern Suburbs make up some of the most popular residential areas in Cape Town. With large plots of land and roomy homes, the area attracts a fairly affluent crowd. The suburbs in the area include Rondebosch, Claremont, Plumstead, Ottery, Wynberg, Newlands, Constantia and Bishopscourt, Pinelands, Observatory, Tokai, Bergvliet, Kenilworth and Steenberg. Peaceful, quiet and leafy, the Southern Suburbs are seen by many as the perfect place to bring up children.

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