The rental market has changed but some landlords still have unrealistic expectations of rentals rates.
The Southern Suburbs sectional title rental market has softened notably over the last few months and average rental rates have declined by up to 36% according to Imtiaz Adam, an achiever agent with Seeff.
While many landlords have taken note of the market deterioration and have adjusted their rentals downwards so as to avoid rising vacancies, many are still unaware of the market shift. We are still finding landlords coming to us from other agencies hoping that we can find them a tenant willing to pay high rental rates. Unfortunately, tenants are facing financial pressure due to the rising costs and result of the overall economic decline, he says.
The situation right now is, that while there is some expectation that the property market will start recovering, the mixed economic outlook and lag in the effects of the economic decline is only now being felt in the rental market. A consequence of this, is that rental rates that tenants are able to pay has declined notably.
Adam cites an example of a furnished two-bedroomed apartment in Claremont which was rented out for R15,000/month last year, but can now only achieve R11,000-R12,000/month. Even the lower end of the market is feeling the decline, he adds. In Plumstead for example, a one-bedroomed apartment could be rented out at R7,500/month last year, but will now only achieve R6,500/month.
Smart landlords are understanding the effects of the current market and have reduced rentals considerably to accommodate the market shift and tenants. At the same time, rather than sitting with empty properties, they are still earning a return on their investment, says the agent.
We are also finding that, rather than upgrading to better accommodation, many tenants are staying put and renewing their leases on their current premises. Another fall-out from the market decline, has been that we have had a few incidences of lease cancellations per the CPA where tenants could no longer afford the rental and had found cheaper accommodation elsewhere.
Tenants are under financial pressure and Adam says that he would urge that landlords to take this into account when determining increases or achievable rental prices.
Adam cites a further example of just how challenging the market is right now, being the case of a two-bedroomed unit in Seven Miles South in Claremont, a popular complex for students and professionals which previously achieved R15,000/month. However, after marketing it for three months and reducing the rental three times, it finally settled on finding a tenant at R11,000/month. Another example, is an apartment block such as The Herschel which achieved R15,000/month minimum for a two-bedroomed apartment last year, but now only achieves R13,000/month.
He says that the market did not experience the usual rush between last October and March this year and with the quieter winter period upon is, landlords are urged to work with agents to ensure their rental expectations can be met, failing which, they will face rising vacancies. There is still demand, he concludes, but at notably lower rental rates.