KZN buy to let property market sky-rockets

Private Property South Africa
John Roberts

Buy to let investors in KZN are virtually setting their own rental prices in popular suburbs, with prospective tenants outstripping supply three to one, Just Property Group CEO John Roberts says.

The demand is particularly high in the Upper Highway area and Durban central business district. Upper Highway, covering Kloof, Gilletts and Hillcrest, is securing rentals on par with Umhlanga Rocks.

Roberts says there are an increasing number of people not qualifying for bonds as the banks have tightened their access to credit in line with the Consumer Protection Act locally, as well as international banking regulations. South Africa had also experienced a growth in consumers who are suffering poor credit histories and are thus not qualifying for bonds.

This has boosted the buy to let market as investors now have access to a steady stream of potential renters.

The group has seen growth in the property market below R1-million with this accommodation, typically a two-bedroom, one-bathroom unit of 110m2, securing monthly rentals of between R4 500 and R5 000. There is also movement in the top-end of the market where companies pay rents ranging from R16 000 to R25 000 per month for their executives.

While anticipating the rental market to continue improving in 2014, Roberts is realistic about the impact that e-tolling, the national general election and the growing strike action will have on disposable income. The debt ceiling crisis in the US could also potentially ripple into the local economy, specifically in terms of market confidence.

“Investors are adopting a wait-and-see approach, but there are expectations that the rental market will be strong into the year ahead,” he says.

Roberts cites landlords privately managing their properties as the greatest opportunity for growth. TPN statistics reflect that 70% of landlords manage their own properties as they do not recognise the value in having agents involved with the month-to-month issues. These include rental collection, maintenance, utility payments, tenant mediation, credit checks and vetting, and lease renewals.

The new credit indemnity, whereby all debts below R10 000 will be removed from credit bureau records, will also affect searches for credit checks. Roberts says the proposal would not be cumulative debts to that amount, but every debt under R10 000 being expunged from the records, making it virtually impossible for anyone to get an educated risk assessment.

“While landlords may use agents' experience and expertise in the vetting process, they do not realise the implications should tenants stop paying three months into the contract. The CPA also allows tenants to provide 21 working days’ notice on leaving regardless of the lease agreement,” he says.

Consequently, landlords who are not aware of their rights may have to pay legal costs and brave the situation without expert assistance.

Roberts says the eThekwini municipality has also changed its utility bills policy such that tenants cannot take out accounts in their name. Consequently, landlords may find the electricity disconnected on another property in their name because the tenant is in arrears.

“The landlord now has to take full responsibility for their tenants including damage to communal property and unpaid fines. The reality is that managing your own property can be messy, while agents know the laws and remain abreast of the regulation changes,” he says.

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