High rentals: Which province tops the list?

Fin24
2013-11-13 16:16
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Cape Town - If you want to rent a property in current market conditions, you'll have to fork out an average R13 000 upfront, according to the PayProp Rental Index.

The index shows that for the first time since October 2010, the year-on-year increase in average rental values is higher than 10%.

As of September 30 2013, the national average rental value stands at R5 757. This is 10.4% up from the R5 212 recorded the previous year.

“We’ve scrutinised the cause and sustainability of this surge in growth over the last 12 months, as general economic data paints a picture of consumers being under immense pressure, and this increase is in contradiction,” says PayProp CEO Louw Liebenberg.

The high increases are a result of dwindling property investors, he said.

“This is limiting stock in the rental market, leading to artificially high rentals resulting from a mismatch between supply and demand,” said Liebenberg.

PayProp said in a statement that this view is borne out by data from the likes of John Loos of FNB, which reveals that just more than 25% of home purchases were made by buy-to-let investors in 2001.

Less than 9% of home purchases at present are intended to be investment properties, it said.

Liebenberg said the ratio of damage deposits held as a percentage of rentals invoiced is also pushing up rentals.

This number has steadily increased since October 2012, to the point where average damage deposits relative to rentals are no less than 131%.

“This puts a huge amount of pressure on tenants who are now required to produce an average of R13 000 up front, a sum made up of the first months rental and deposit.”

The index also revealed a shift in ranking between the top three provinces where rentals are the most costly.

Mpumalanga has taken the lead, with Limpopo dropping to second and Gauteng moving up to third place.

In the second quarter, the highest average rentals were achieved in Limpopo, followed by Mpumalanga and KZN.

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"Interestingly, we have seen continued growth in the Northern Cape, as predicted in previous indices. The momentum there is such that rentals in that province now exceed those of the Western Cape."

The number of rentals in the R5 000–R7 500 price band is the fastest-growing category, while the R2 500–R5 000 price band is stagnating, the index found.

The second-fastest growth was recorded in the R7 500–R10 000 price category, with limited gains in the number of rentals in the remaining categories above R10 000 per month.

- Fin24

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