Johannesburg - It has become markedly more expensive to rent a flat in Johannesburg than in Cape Town, latest figures from property economists Rode & Associates show.

According to Rode's Report for fourth quarter 2007, upmarket one bedroom flats in Johannesburg are now fetching an average rental of R3 533/month.

Cape Town tenants on the other hand are paying nearly R1 000/month less for accommodation of equivalent size and quality, with one-bedroom rentals at an average R2 695/month.

The price gap between the two cities has also widened to around R1 000/month for larger flats (two and three bedrooms).

Cape Town has traditionally been the more expensive city in which to rent residential accommodation. For instance, two years ago Cape Town tenants were paying R5 135/month for a three bedroom flat while Johannesburg tenants could still pick up the same size unit at R4 691/month, says the Rode Report.

Figures from property letting group Trafalgar confirm that flat rentals in Johannesburg have in recent years outpaced that of Cape Town.

Trafalgar's index shows that rentals in Johannesburg rose 30.3% in the three years to end-December 2007, while Cape Town saw a 20.5% rise over the same period.

Last year Johannesburg rentals were up 11% while Cape Town recorded more pedestrian growth of 8.5%. That compared to an average 9% rise in residential rentals across SA in 2007 (up from 6.4% in 2006).

Demand stronger

Trafalgar MD, Andrew Schaefer, expects that rental demand will strengthen further this year as higher interest rates and the introduction of the National Credit Act (NCA) forces more potential buyers to rent instead.

Schaefer says national rental growth is likely to rise to between 10% and 12% in 2008.

Schaefer expects Johannesburg to lead the pack, as a growing shortage of rental stock continues to push rentals higher in what Schaefer refers to as SA's "premier economic hub". He notes that there is already a shortage of rental accommodation in Johannesburg priced at below R6 000/month.

Says Schaefer: "Johannesburg tenants must prepare for even bigger rental increases over the next decade."

That is of course bad news for tenants but good news for Johannesburg landlords who are likely to see better returns on their buy-to-let properties over the next few years than their Cape Town counterparts.

- Fin24