Property360 - National Digital Magazine - 14 October 2022

Rental market realities

EVEN in tough times, residential tenants are paying their rent in full and on time. In fact, consumers consider rental payments to be the second-most important budget credit priority, second only to mortgage or bond repayments, says Waldo Marcus, the head of marketing and sales at TPN Credit Bureau.

The latest data from TPN shows that tenants are prioritising their rentals, even though TPN’s longterm data indicates that consumer strain is almost always shared with property owners, reflecting either in higher vacancies, lower returns or late payments.

However, before you breathe a sigh of relief, note the cost of rent will probably rise as landlords try to recover their increasing costs.

PayProp Rental Index recently revealed that quarterly year-on-year rental growth continues to climb, with the average rent increasing by 2.6% in the second quarter of 2022.

PayProp’s Johette Smuts says the “continued financial demands faced by consumers as we move through 2022 could force those in the rental market to seek out cheaper accommodation options, which would prevent a complete rental market recovery”.

In this sort of market, you may see multigenerational homes in which either grandparents or children move back home or all live under one roof. You may also see downsizing, friends pooling

resources to live in a commune, or even an alternative way of living, such as a mobile home.

For the second quarter of 2022, the TPN Residential Rental Market Monitor shows, however, that the number of tenants in good standing with their monthly rent obligations has improved from 80.78% in the first quarter to 82.22% in the second quarter.

Tenants in good standing are those who have paid their rent on time and in full.

This shows, says Marcus, that despite facing economic challenges, exacerbated by load shedding and high fuel prices, consumers regard paying their rent as a priority.

This is good news for the residential rental market which is proving to be “surprisingly resilient”.

However, Jacqui Savage, the national rentals manager for the Rawson Property Group, believes the road ahead will not be “without a few bumps” for tenants.

“It’s definitely heartening to see the rental market gaining momentum after a long period of stagnation,” she says. “Vacancy levels are recovering nicely and demand looks set to grow.

“That said, rising costs are putting increasing pressure on landlords to escalate rentals, while consumer inflation is eating into tenant affordability at the same time.”

Marcus concurs. “The residential property market is

mirroring the end of the lowinterest era and landlords are passing their higher costs on to tenants, which is making it increasingly more expensive to rent,” he says.

Chris Xotongo, the sales property practitioner at Just Property, Port Elizabeth, adds that the macro pressures of rising interest rates and the everincreasing cost of living as a result of inflation have resulted in many first-time home buyers feeling the pinch, and purchasing activity in this segment has waned.

“Those who might have been considering buying, are now opting or being forced to rent. Increased demand is good for the rental market,” says Xotongo.

The TPN report shows that tenants in the R7 000 to R12 000 and R12 000 to R25 000 rent brackets show a strong commitment to paying their rent on time, with 88% and 87%, respectively, in good standing.

Although tenants paying R3 000 to R7 000 – a rent bracket which makes up more than half the market – have not recovered to pre-pandemic levels, they continue to head in the right direction, increasing their good standing by 2% to 82.8%.

Bucking the trend, however, is the bracket above R25 000, with a noticeable deterioration in good standing, to 77.38%.

The drop has precedent, however, and is partly attributable

to the cyclical nature of tourism, particularly in the tourism regions.

“Although this bracket traditionally experiences a drop in the second quarter of the year, it tends to strengthen again in the third quarter,” says Marcus.

Higher interest rates have traditionally resulted in improved demand for rental property.

“However, the balance in a fragile economy is a fine line between demand shift and the ability of consumers to afford any type of formal rental accommodation,” Marcus adds.

The South African Reserve Bank’s recent repo rate hike to 6.25% is expected to slow residential property sales, although prices in certain areas are expected to continue to climb as homes in well-serviced areas remain attractive assets.

Employment figures typically correlate with the formal rental market, with improved employment figures, combined with higher interest rates, tending to drive demand for rental properties.

Statistics SA’s recently published Quarterly Employment Statistics, which measures employment, found that employment declined in the second quarter, losing 119 000 jobs.

The consumer price index eased during the pandemic which resulted in lower interest rates.

“This, combined with the workfrom-home trend, encouraged certain segments of the market to

purchase property which, in turn, fuelled a property inflation blaze,” says Marcus.

From a provincial perspective, TPN has found:

• KwaZulu-Natal’s tenantsin-good-standing figure dropped to 80.16% while its vacancy rate remained high, at 9.91%. KZN has the highest rental escalations of all provinces, at just under 5%.

• Gauteng continues to struggle to achieve higher escalations, with rentals growing at just 1.69% year on year. The province has a low vacancy rate, at 6.67%, a figure which is expected to increase as supply is added. Only 80.62% of tenants are in good standing.

• The Western Cape saw steep rentaal increases of 4.17% in the second quarter but this has not impacted landlords’ ability to collect rent. The province’s good standing figure is at 86.61% while its vacancy rate remains stable.

• The Free State and North West are struggling to collect rent as a result of a high rate of unemployment in both provinces (40.3% and 49.2% respectively).

Paul Stevens, the CEO of Just Property, advises landlords: “Beneath the national figures on tenant numbers lie significant variations from region to region, town to town, even street to street. As a landlord, you need to know your location, your tenants and, crucially, your likely returns.”

Landlords likely to up hard-hit tenants’ rent, if they haven’t already

PICTURE: KETUT SUBIYANTO/PEXELS

Cash is king if you’re in the market for property

IF YOU can find a home you love and can afford to buy it for cash, then maybe owning property is a good bet right now, says property economist, Erwin Rode, the CEO of Rode & Associates.

If not, forget about it, he says.

Rode’s advice that property is currently not a great asset flies in the face of what some other experts say: owning a home is a good investment, even in 2022, amid rising interest rates and cash-strapped consumers.

But you may have to buy and play the waiting game.

South Africa has just emerged from a “home-buying frenzy”, when the embattled Covid years of 2020 and 2021 saw the lowest interest rates in almost five decades and offered a window period to get on the property ladder.

This was especially true for first-time home buyers, many taking up to 30-year bonds just to own some bricks and mortar, according to the ooba Group. For many, this was a no-brainer as it became cheaper to buy a home than rent one.

“The Covid-19 pandemic period was positive for the local property market, triggering an acceleration in house price inflation and a rebound in activity levels,” says Rhys Dyer, the CEO of ooba Group.

However, as interest rates return to “normal levels”, many who bought on the edge of their affordability scale are beginning to get a gnawing feeling that perhaps they bought too quickly, thinking the interest rate honeymoon period would last forever – despite continued warnings from the industry that it would not.

And even those thinking of buying are having second thoughts. However, experts seem to, on the whole, think buying and owning a home remains a good idea.

But not Rode.

“Homeownership has an emotional and a financial aspect to it. I will talk to the financial aspect,” says Rode. “The housing market is in a down-swing phase and has been for the past seven years.

“This means that, in practice, the myth that it’s a solid investment to buy a property falls short as it is based on capital growth which is zero. So, you will find many young people buying a house as one of the first things they do, because they believe the value will keep on rising.

“This myth, however, is only valid if you buy a home for cash, not take out a mortgage; or when you buy during the upswing of the long property phase, like in the first decade of the 2000s.

“The problem with a mortgage at today’s interest rates is that you get negative financial gearing, which means your total

return (income yield plus capital return combined) is negative. This principle also applies to owner-occupiers, not just buy-torent investors.”

However, your returns will be better if you are buying in the below-R700 000 segment as your income returns in the lowerpriced suburbs are better, Rode says.

“The more expensive the home, the less likely your rental will cover the interest on your bond. In other words, the more expensive the property, the lower the income return. Purely from a financial point of view, over the next few years, you can expect a very poor and negative return from a property with a 90% plus bond.In fact, your total return will be miserable.”

Rode advises to rent and save the difference between your rent and what you would have paid on a bond. Eventually, you could have a nice lump sum savings, if you are disciplined enough to save.

FNB property economist John Loos believes, however, that the market – hit by high interest rates and financial pressure – can be good to invest in as you will have more negotiating power as sellers may be ready to accept lower offers on homes.

Samuel Seeff, the chairperson of the Seeff Property Group, agrees that there is more room for buyers to negotiate.

Loos, like the regional director and CEO of Re/Max of Southern Africa, Adrian Goslett, believes renting and owning a home have their pros and cons.

“In some instances, it may be the cheaper option to rent in the short term, given the big transfer costs involved with buying a home,” says Loos. Renting can also give people more certainty over home-related cash flows, because many of the surprise maintenance costs are the responsibility of the landlord. It also allows for greater mobility if you are uncertain about where you are going to be working or living in the not-too-distant future. Buying and selling homes frequently, with all the transactionrelated costs, can lead to big losses.”

Loos says that generally, “there is a strong desire to own one’s own home, both from an investment and a lifestyle perspective, so this continues to be the dominant trend”.

Goslett, who believes buying a property will provide you with “an asset that will earn you a substantial return on investment”, adds that it’s up to the individual to decide whether to rent or buy.

Renting, he says, offers the tenant a certain amount of flexibility. “Each individual needs to evaluate their circumstances and make the decision that meets their needs.”

Rental rates are unpredictable, however,

so if you have a fixed rate on your bond, it may be easier to predict your monthly spend.

The pool of those being able to afford to buy is, however, shrinking and market activity is in a downward movement. For those who can afford to, there may be some steals out there.

Waldo Marcus, the head of marketing and sales at TPN Credit Bureau, says the higher interest rates and a reduced ability to save could mean “some higher-income tenants decide to keep renting instead of buying their own properties”.

While higher interest rates “have traditionally resulted in improved demand for rental property”, the balance in “a fragile economy is a fine line between demand shift and the ability of consumers to afford any type of formal rental accommodation”. ooba’s Dyer suggests homeowners and home buyers take a long-term view with regard to their investments.

First, “homeowners can breathe a temporary sigh of relief as early indicators suggest GDP recovery over the third and fourth quarter of this year”, he says.

However, it comes with a warning.

“While economic activity is expected to rebound as the dampening effects of the Kwazulu-Natal flooding fades, the recent bout of stage 6 load shedding – if protracted – could stifle the extent of the recovery.”

Dyer adds that on the home loan front, applicants will continue to benefit from attractive interest rate discounts – spurred on by healthy competition among the banks, longer home loan repayment periods and the more realistic pricing of homes for sale.

In terms of the impact of the interest rate hiking cycle on the property market, Seeff says we are beginning to see a two-paced market emerge. “While demand is high on the one side, buyer hesitancy is increasing, with deals taking longer on the other side”.

PICTURE:

PET-FRIENDLY GARDEN HOMES FOR THE PRICE OF A FLAT

PET-FRIENDLY GARDEN HOMES FOR THE PRICE OF A FLAT

The Viognier complex is an exciting new release of 204 ground floor homes in the established Aan de Wijnlanden security lifestyle estate in the Stellenbosch Winelands

TH enclosed landscaped and lawned garden, and an enclosed braai on an open patio, ideal for the enjoyment of young and old (and pets). The solid side-wall boundaries of the homes are designed for privacy and safety. The magical Stellenbosch mountain views and fresh country air is a priceless asset that comes with every home purchase.

Modern homes with top class finishes and amenities

THE DESIGNER Viognier two or three-bedroom homes will have an enclosed landscaped and lawned garden, and an enclosed braai on an open patio, ideal for the enjoyment of young and old (and pets). The solid side-wall boundaries of the homes are designed for privacy and safety. The magical Stellenbosch mountain views and fresh country air is a priceless asset that comes with every home purchase.

Access to all the Aan de Wijnlanden Estate facilities

Viognier residents will be able to enjoy the 50 hectare estate, including its modern clubhouse with its large entertainment area, kiddies clubhouse, tennis courts, equipped gymnasium, swimming pool kilometres of walking trails and a 5ha conservation area. The estate already provide for a 24 hour manned security team, a CCTV monitored system and biometric access control.

landscaped areas on the common property

Access to all the Aan de Wijnlanden Estate facilities

Location and access

Viognier residents will be able to enjoy the 50 hectare estate, including its modern clubhouse with its large entertainment area, kiddies’ clubhouse, tennis courts, equipped gymnasium, swimming pool, kilometres of walking trails and a 5ha conservation area. The estate already provide for a 24 hour manned security team, a CCTV monitored system and biometric access control.

Competitive levy

gas they use. Groundwater from the estate will be used to irrigate landscaped areas on the common property

Competitive levy

The competitive levy of only R1 400 a month covers all the costs of security, common property landscaping, estate management as well as normal sectional title costs.

Prices and plans

The competitive levy of only R1 400 a month covers all the costs of security, common property landscaping, estate management as well as normal sectional title costs.

The homes are thoughtfully designed to maximise space, enhanced by increased ceiling heights throughout. The finishes include fitted kitchens with granite tops, a selection of floor tiles, and vinyl floorboard finishes. High end sanitaryware and tapware are included, and the kitchen will be fitted with a gas hob oven. The houses will all be wired in order to be invertor ready, allowing residents to provide their own power back up system, and easily connect to essential plugs and lighting. A central fibre network will ensure that every home is internet ready, with several internet providers to choose from.

Modern homes with top class finishes and amenities

The homes are thoughtfully designed to maximise space, enhanced by increased ceiling heights throughout. The finishes include fitted kitchens with granite tops, a selection of floor tiles, and vinyl floorboard finishes. High end sanitaryware and tapware are included, and the kitchen will be fitted with a gas hob oven. The houses will all be wired in order to be invertor ready, allowing residents to provide their own power back up system, and easily connect to essential plugs and lighting. A central fibre network will ensure that every home is internet ready, with several internet providers to choose from.

Location and access

Viognier is centrally located, with easy access to Stellenbosch, Somerset West, Strand’s beaches and Cape Town International Airport. It’s set within minutes of some of the Western Cape’s best schools and universities.

A good investment

Viognier is centrally located, with easy access to Stellenbosch, Somerset West, Strand’s beaches and Cape Town International Airport. It’s set within minutes of some of the Western Cape’s best schools and universities.

All the homes have been planned and designed with economy of running costs and reduced maintenance in mind. Energy usage will be minimised by the provision of gas hobs and a central hot water system allowing homeowners to pay only for the hot water and

A good investment

All the homes have been planned and designed with economy of running costs and reduced maintenance in mind. Energy usage will be minimised by the provision of gas hobs and a central hot water system, allowing homeowners to pay only for the hot water and

Prices and plans

There are four plans, with the two bedroom one bathroom home starting at R1 295 000, and the three bedroom two bathroom home from R1 595 000. The price includes VAT, a parking bay and transfer fees. Lock up garages are available for sale, and there is an option to enclose the patio with aluminum sliding doors.

Occupation of the homes will be from July 2023.

There are four plans, with the two bedroom one bathroom home starting at R1 295 000, and the three bedroom two bathroom home from R1 595 000. The price includes VAT, a parking bay and transfer fees. Lock up garages are available for sale, and there is an option to enclose the patio with aluminum sliding doors.

Occupation of the homes will be from July 2023.

For further details visit viognier.aandewijnlanden.co.za or phone Nicho at 072 601 1772 or Hannes at 066 476 1890

For further details visit viognier.aandewijnlanden.co.za or phone Nicho at 072 601 1772 or Hannes at 066 476 1890

GORGEOUS

RONDEBOSCH

Complex

RONDEBOSCH R1,15 MILLION

HEIGHTS

RONDEBOSCH

ROSEBANK R1,68 MILLION

WHITEHALL COURT R1,35 MILLION

NEWLANDS R5,495 MILLION NEG

garden

Security

Main

Two Bedroomed Apartment

Spacious Three Bedroomed Apartment

Mountain

Academic Mile! Security Complex set in pretty garden setting. Bachelor Flat with open plan living area and ample cupboards. Galley Kitchenette and Bathroom with Bath, Toilet and Basin. **Walk to UCT, Jammie Shuttle, Baxter Theatre, Restaurants, Shops and Transport.

Small Security Complex. Two Spacious Bedroomed Apartment with lounge leading to large Balcony. Fitted Kitchen & Full Bathroom. *Parking Bay. Close to Dean Street Shops, Restaurant and Jammie Shuttle Stop.

with Fitted Kitchen open to Dining Room

Bedroomed

Pied-à-terre Bachelor Apartment in Small Road. Security Complex with Lift and Lovely Views! Open plan Living Room with Built-in Cupboards. Fitted Kitchen and Bathroom with Shower. *Plus and Balcony. Shower Bathroom. Walk to Rondebosch Shops, Doctors Rooms, Baxter Theartre and Transport.

Lounge and Balcony with views. Full Bathroom and Sep Toilet. **Covered Parking Bay. **Walk to Kingsbury Hospital, Library, Restaurants, Jammie Shuttle, Shops and Transport!

with Kitchenette, Built-in Cupboards and Balcony. Shower Bathroom. Walk to UCT, Jammie Shuttle, Shops & Transport.

Spacious North-Facing Two Bedroomed Apartment with Lounge and Balcony with Mountain Views. Bathroom with Shower over Bath. Fitted Kitchen. *Garage. *Walk to Shopping Centres, Restaurants, UCT and Transport.

Spacious Three Bedroomed Apartment (123m²) above the Main Road in pretty garden setting. Fitted Kitchen and Bathroom. *Parking Bay. Walk to UCT,

Large One Bedroomed pied-à-terre Apartment with Lounge and Balcony & Stunning Mountain Views. 24HR Security Shareblock Complex. Fitted Kitchen. Shower Bathroom. **Garage. **Catering & Cleaning Services. **Walk to Shops, Baxter Theatre and Library!

Charming double storey Townhouse set in pretty garden. Three / Four Good Sized Bedrooms, Two Bathrooms, Lounge, Dining Room, Fitted Kitchen, Guest Toilet, Patio and Garden. **Garage and Parking Bay. **Plus Flatlet. **Walk to Schools, Shops & Transport.

Charming Two Bedroomed Apartment with Fitted Kitchen (with built-in Oven, Hob and Extractor Fan) open plan to Lounge and Balcony. Two Bedrooms with Ample Cupboards. Bathroom with Shower over Bath, Toilet and Basin. **Plus Carport. Academic Mile - Walk to UCT!.

Standachance

QuadrantGardens

Experience Quadrant Gardens

Open Day, Saturday, 22nd October 2022 • 9am - 12pm

Quadrant Gardens is a stunning, state of the art property in Wilderness Road Claremont.

Spacious apartments with quality finishes, courtyard and roof-top gardens, inviting lounge areas and safe underground parking. Customised care plans if needed. Quadrant Gardens in Claremont,retirement at its best.

Visit Quadrant Gardens on the 22nd October 2022 from 9am - 12pm. Stand a chance to WIN! 2- night stay at Quadrant Gardens.

For more information or to book your personal appointment contact Quadrant Gardens Manager, Adam Munga on 021 205 8600 or email AMunga@cpoa.org.za • Wilderness Road, Claremont

Stand a chance to WIN! 2- night stay at Quadrant Gardens.

DOGON GROUP PROPERTIES

Atlantic Seaboard

DOGON GROUP RENTALS

Sea Point

DOGON GROUP PROPERTIES

Southern Suburbs,

DOGON GROUP PROPERTIES

Western

LUNAR SOLAR INSTALLERS

Cape Town

PETER MASKELL AUCTIONEERS

KZN

BALWIN PROPERTIES

Ballito

Office

SHELLEY RESIDENTIAL

KZN

Office 082 412 4463

Email: hello@shelley.co.za

SERENITY HILLS ECO ESTATE

KZN, South Coast Office 073 142 8292

Email: home@serenityhills.co.za

WYTHAM ESTATE

KENILWORTH, CAPE TOWN

063 707

CAPE WINELANDS

Nicho