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Sturdy residential rental demand in Gauteng

Nov 09 2015 21:00
Carin Smith

Cape Town - Foreign corporates and local professionals are creating a considerable demand for accommodation closer to Gauteng's business centres and apartment living is increasingly sought after in the rapidly developing hubs of Sandton, Rosebank and Menlyn in Pretoria, according to Jason Shaw, manager of the Pam Golding Properties (PGP) Fourways and Midrand offices.

Shaw says many properties in Gauteng are purchased for purposes of letting them out and carefully chosen properties are an excellent investment.

“The residential property rental market in Gauteng is a complex one with opportunities and markets varying from area to area. However, many astute investors are achieving excellent returns on their investments through the buy-to-let market,” said Shaw.

“Some of these are foreign investors, including a number from other African countries. These investors have taken advantage of the weak rand to purchase local properties as rental investments.”

He says quality homes offered at the right rental prices in good areas within Gauteng are snapped up fairly quickly. In some suburbs, there is such a strong demand for homes that there is a shortage of rental properties available.

According to Shaw, one of the many advantages of purchasing property for the rental market is that these homes can offer investors not only the opportunity for rental income, but also for capital appreciation returns.

Linda Prigge, rental manager at PGP's Hyde Park office, says both the purchase and rental markets in Gauteng are currently sturdy due to an ongoing demand for homes in the province.

“Rentals remain a popular option for those who are not able to obtain bonds or for those who may be feeling inflationary pressures. There are also a number of individuals who, for various reasons, prefer renting instead of owning their own home,” said Prigge.

"A wisely chosen property can yield a gross annual return up to a 12% and a net return of approximately 9.5%. For example, a R1.5m property should fetch a rental of approximately in the region of R15 000 with an average rental escalations of between 8% and 10% year on year. “These kinds of returns are attractive to many investors,” she adds.

According to Prigge, where properties are correctly priced, landlords generally have little trouble in letting them out. However, some owners do overprice their properties and, as a result, these homes do not rent out as well or as quickly as they should.

There is a range of potentially lucrative residential property options available to investors in Gauteng ranging from freestanding homes to townhouses, cluster homes, homes in residential estates as well as apartments throughout Gauteng’s residential suburbs.

Rental homes in suburbs such as Westcliff, Bryanston, Parkhurst, Parktown, Dunkeld, Morningside, Sandown and Hurlingham, Dainfern and Fourways Gardens, to name just a few, are in tremendous demand, according to Shaw.

“The demand from multinational companies provides an important stimulus for the rental market, in both Johannesburg and Pretoria. There are many multi-national companies doing business in South Africa seeking upmarket accommodation for their senior staff members. These companies tend to sign rental agreements for periods of between one to three years.”

Shaw emphasises that the corporate rentals market is fastidious and homes must, therefore, meet a number of requirements before they would be considered. These homes often need to be furnished, while upmarket clusters within secure developments or upmarket apartments, in close proximity to the central business district of Sandton, continue to be in high demand.

READ: Capital gains tax on rental property

According Prigge, outstanding security, convenience and lifestyle are major draw cards, while many executives with families appreciate having excellent schools within easy reach.

“The executives at these companies have a preference for upmarket homes with bedrooms all en suite. A swimming pool, underfloor heating and staff rooms are also usually requirements. Companies will also insist on homes having an alarm and an armed response service so that they are able to meet their legal obligations to keep their employees safe,” she explained.

Properties in estates such as Dainfern, Fourways Gardens, Cedar Lakes in Johannesburg, and Waterkloof Ridge, Waterkloof and Brooklyn in Pretoria, are offering particularly excellent returns to those landlords who have an understanding of this corporate market and its unique requirements. These homes generally represent a sound, long-term investment, according to Shaw.

In Pretoria, the high-end rental property market is also stimulated by the large number of embassy and foreign mission personnel seeking accommodation in the city.

Shaw explains the rental corporate rental market can be highly lucrative. Some 30% to 35% of all rentals in areas such as the Dainfern Golf Estate are made to corporate institutions and it is a very rewarding market for investors.

PGP recently placed a fully furnished home in Dainfern Valley on the rental market for R150 000 a month. In addition, a property in Dainfern was rented to an executive for a record R85 000 a month late last year, a rental that does not include levies, services and utility costs.

He adds that some 90% of the properties being rented out in Dainfern are to companies, while in Fourways Gardens and Cedar Lakes this figure stands at approximately 50%. He notes that 30% of the properties in the three estates are purchased for the purposes of letting.

“The prices of rental units depend very much upon the area in question. It should be kept in mind that multinational corporates do have limits to their budgets and are price sensitive. Rentals should, therefore, remain competitive and realistic. There is a demand for everything to be included in the rental such as furniture, servicing, security and so on. Corporates want to be able to offer their employees an all-inclusive package,” advises Shaw.

Some multinational companies with operations in Gauteng are seeking to accommodate large numbers of employees. Shaw points out that, while many corporates rent homes on behalf their employees, others provide a rental allowance and allow their people to find their own accommodation.

“It is critical for anyone who is looking to invest in property to rent to obtain quality advice,” he adds. “One needs to be able to gain an idea of what kind of returns the home will fetch and which areas are the best to invest in. You also need to know what kinds of individuals and companies are likely to rent a particular property and what features and facilities they are looking for,” he explains.

ALSO READ: How to declare rental income

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pam golding properties  |  property  |  rentals  |  money
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