Property360 - National Digital Magazine - 11 November 2022

Tenants may soon compete

homes – here’s how to make a landlord pick you

apartment only at the end of the month.

“That was our saving grace,” says Chris Schaefer.

BY BONNY FOURIE bronwyn.fourie@inl.co.za

THE DEMAND for rental homes is expected to outstrip supply in the coming months as investors snap up buy-to-let properties for entry-level buyers who can no longer afford to purchase.

Continued rising inflation is creating what looks to be a lingering increasing interest rate cycle, and Makhosini Ndlovu, the product head at FNB commercial property finance, says that historically, such an environment results in growing demand for residential rental properties.

This is because people who were planning on buying a home have to rethink property ownership due to affordability concerns.

While, currently, supply of rental stock is largely sufficient to meet the gradually growing demand – as the impact of increasing interest rates is filtering through to consumer budgets –that may change in the near future, he says.

“We expect demand to gradually outstrip supply in the coming months.”

How to beat other tenants wanting the same property Even in a balanced market, tenants compete with others for the same home and, often, it is a case of first come, first served – provided all applicants pass the vetting process equally.

In an environment where there are more tenants than properties available, it will be advantageous to stand out.

The Schaefer family from Durban recently found themselves in such a situation, competing with another family to rent an apartment perfectly suited to them. The unit was a new listing and by the time they viewed the property, the other family had submitted their application.

But one thing was in their favour: even though it was the first week of the new month and they had paid rent at the home they were living in at the time, they had the funds to put down the deposit and first month’s rent immediately and take occupation within a week.

The other family, however, were able to move into the

“When we told the agent we were able to move and pay immediately, she told us that we may have an advantage as the landlord wanted to let the home as soon as possible. And as it turned out, our application was approved that evening.”

But not everyone is in a position to do what this family did. In fact, most tenants need to wait for their deposits to be returned before they can pay the deposit at a new rental property.

Here are some other ways for your rental application to stand out from the rest:

Be prepared with your paperwork

Most landlords will require you to fill out a written application, so submitting it quickly will give you a competitive edge.

The best way to do this will be to bring all the necessary documentation with you to the viewing so that if you like the property, you can fill out the application on the spot.

It will help to ask the agent beforehand what documentation is needed, but most applications will require a copy (sometimes certified) of your ID, and proof of salary and previous residence.

Have a few references from previous landlords

Whenever you leave one rental property to move to another, it helps to get a reference from the landlord.

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Collecting references can come in handy whenever applying for a new lease.

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If you are able to show an agent or landlord positive references from previous landlords, it may help nudge your application to the top of the pile.

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If you have never rented a property before, you could gather some character references to attach to your application.

Prepare a family CV

Granted, this is something that is usually done by South Africans looking to rent properties overseas but it would not hurt your application here. Your CV could include photographs of all family members as well as a brief description of what they do or enjoy doing.

This is something that is not asked for but it could help if a landlord can relate to a family by seeing them as people and not just names on a piece of paper.

Have a pet CV

Similarly, a pet CV with photographs of your furbabies as well as some information about their characters

and up-to-date veterinary records could endear a landlord to your family.

Many landlords do not want pets at their properties and even those who do allow them may well choose a family without pets than one with pets. But if they can see how adorable your animals are, they may just be swayed in your direction.

Again, this may not be something many tenants can do, but if you are able to perhaps offer to pay a higher rent or put down a higher deposit, this could elevate your application if several people want the same property.

Or perhaps you could offer to pay for the monthly security costs, fix up things around the home or have the property professionally cleaned when you move out.

Just be sure not to make promises that you cannot keep.

Offer to sign a longer lease

This may not be appreciated by all landlords as they may have certain plans for their property but if you know the home is one you will be happy living in for longer than the required one or two-year period, it may help to offer to sign a longer lease.

Many landlords may be comforted by the fact that their investment will generate an income for a longer, fixed period

PICTURE: KAROLINA GRABOWSKA/PEXELS

PROPERTY experts and economists have predicted a 0.5% increase at the end of this month, which means homeowners must prepare to pay extra on their bonds.

Just how much more you will pay depends on the value of your home loan.

The current repo rate is 6.25%, which means the prime lending rate is sitting at 9.75%.

If the interest rate is hiked by the predicted 0.5% to reach 10.25%, then your repayments this month – if your loan period is 20 years – will increase by:

R1 million bond R331

R1.5 million bond R497

R2 million bond R663

R2.5million bond R828

R3 million bond R993

R3.5 million bond R1 160

R4 million bond R1 325

There’s no doubt that bond repayments have become a struggle for some homeowners, says Leondard Kondowe, the

finance manager for the Rawson Property Group.

“As bond originators, we’re sometimes able to advise struggling bondholders on ways to restructure their personal finances to free up capital for their bond. When this isn’t possible, or the results aren’t significant enough, however, it’s essential that bondholders approach their lender directly, and as quickly as possible.”

Although lenders are typically willing to offer compromises, he urges bondholders not to mistake the helpful attitude for general leniency.

“It’s absolutely critical that you honour the new agreements you make with your lenders. Not doing so risks adversely impacting your credit rating, and could see your new agreement revoked.”

Between the rising cost of things like credit card debt and vehicle finance, the increasing expense of fuel and groceries, and poor salary growth, it’s no surprise that South Africans are feeling

the pinch. This hasn’t affected only new bond applicants, but also those paying off home loans, Kondowe says.

For example, someone paying R7 675 a month on a R1m home loan in mid-2020, would now be paying R9 390 a month. That’s almost R2 000 extra to find in the budget, every month.

Given that many homeowners will be paying more on their bonds, BetterBond expects to see lower transaction volumes and a softening of house prices, says chief executive Carl Coetzee.

“However, this will be segmented across the market, with the lower end relying heavily on housing finance.

“The good news is banks have a healthy appetite to lend and we are seeing that BetterBond’s approval ratio for the 12 months ending October has increased by 2.3% year-on-year, and by almost 1.5% year-on-year for first-time buyers.

“Affordability should always be a consideration when buying

BONNY FOURIE bronwyn.fourie@inl.co.za

a home, irrespective of where we are in the rates cycle. The current upward trajectory is a reminder to homeowners and prospective buyers to budget wisely and consider household expenses when looking at property prices.”

Barbara Larney, of Re/Max Wine and Whales, explains that rising interest rates make buying or selling a home more difficult, while decreasing interest rates make buying and selling easier. As interest rates increase, affordability decreases.

“But, if the economy grows fast enough, rising interest rates will not greatly affect property value and housing prices.

“There’s always a light at the end of the tunnel in real estate. It’s just a matter of finding that opportunity in the current market. For example, even if the economic uncertainty causes the housing market to cool, this could potentially open opportunities to purchase properties at reduced prices

“Buying a home as interest

rates are rising is nothing to fear.

“From a historical standpoint, the prime rate was 25% at the start of 1994 and decreased to 7% at the end of 2020. Now, at 9.75%, the rate is low. And still cheaper than historical comparisons,” says Larney.

The bigger concern, states Re/Max chief executive Adrian Goslett, is that if economist predictions of South Africa’s GDP shrinking slightly in 2023 come true, this will impact unemployment rates and put greater pressure on tax-paying citizens, beyond the increasing interest rates.

“While interest rates are still manageable at this point, I recommend that all homeowners make sure to put themselves in a position to be able to afford the higher repayments on the home loan as well as other debts they might hold.

“This will ensure that they are in a good position if, as many economists predict, we head into leaner times in the year ahead.”

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