Through The Lockdown Levels: The Rental Market in South Africa

Through The Lockdown Levels: The Rental Market in South Africa

Private Property South Africa
Cath Jenkin

A new phase of operation and activity has begun within the South African rental market, as we move through the lockdown levels. Here’s what to expect:

South African rental market

Under the initial lockdown levels, the South African rental market stalled to a halt. Owing to the lockdown regulations, many industries and sectors had to put a stop to their operations in an effort to maximise medical capacity and reduce the spread of COVID-19. As South Africa moves through its lockdown levels, more and more sectors and industries have begun operating again. The South African rental market has returned to life.

Lockdown levels

Under the various lockdown levels, the restriction of people’s movements remains a priority, and this directly affected the South African rental market. During lockdown levels 5 and 4, evictions were not permitted, with a stay on eviction orders implemented until the end of level 3 lockdown. Interestingly enough too, under lockdown level 5, moving house was not permitted, but now that we’re at lockdown level 3, people are free to move into new homes and vacate their current properties.

Tenant concerns

Of course, as the lockdown levels operate to try and prevent the spread of COVID-19 while restarting South Africa’s economy, the effects of the lockdown levels are still felt in several ways. For many people, lockdown levels have created significant financial and personal challenges, including:

  • Pay cuts and job losses: Many South African companies were forced to cease or curtail operations during the initial lockdown levels. This led to many companies opting to cut back on their salary bills, retrenching staff, or putting a stop to hiring. Pay cuts and budget cuts across the board have taken their toll, leaving many tenants unable to maintain their rental payment commitments.

  • From owner to tenant: Pay cuts and job losses may also be ushering in a new generation of tenants. As many South Africans have to confront the uncomfortable truth of a decreased income, they may feel compelled to sell their properties and shift from property owner to tenant. With personal incomes deeply affected by the lockdown levels, many people feel the need to offload the more hefty financial commitments. Whether it be selling an investment property, or shifting from owning their home to renting one, many South Africans are forced to make life-altering financial decisions.

  • Price increases: A significant increase in the price of food items and groceries has been noticed, thereby curtailing many South Africans’ disposable incomes.

  • Managing working from home and child care: Where it has been possible for companies to implement remote working, employees and employers have had to quickly adapt to a change in operational context. With the knock-on effect of having to manage childcare and other domestic arrangements too, this has put pressure on income earners to balance their lifestyle and career loads.

  • Rental payment negotiations: Many tenants have been forced to renegotiate their rental payments with their landlords. This, however, has had a knock-on effect for landlords too, as their rental income has, in many respects, decreased. As noted by Flow, a mere 37% of South African tenants were able to pay their full rental amounts during the initial lockdown levels.

Lockdown level changes

As South Africa moves through its lockdown levels, different regulations relating to the movement of persons are applied. At first, moving house was not permitted, but as the economy has re-opened, and the property market swings back to life, moving house is now allowed. This has led to an increased demand for:

  • Affordable property: The affordable property market in South Africa is the busiest sector of the market. And, as the demand for more affordable properties comes into play, tenants who are looking to scale down their financial demands are keen to explore cheaper rental options. Now that tenants are free to move house again, finding a rental property that’s less expensive becomes a priority for tenants who need to cut back their expenses.

  • Reliable tenants: On the other hand, landlords and property investors are keen to attract reliable tenants who provide some measure of assurance that they’ll be able to keep up with rental payments. To this end, many agencies are noticing a drop in rental prices, as property investors and landlords seek to fill the gap where their reliable rental income once was. To attract the right kind of tenant, comparatively affordable rental prices will become a priority for landlords.

  • Short-term letting conversions to long-term letting: Under the initial lockdown levels in South Africa, the Airbnb sector took a significant hit. Forward-thinking Airbnb hosts, however, have tackled this challenge by converting many of their short-term stay options into longer-term rental opportunities. By converting short-term rental arrangements into potential long-term rental agreements, landlords are better equipped to secure their rental income, and rest assured. This has, however, created a new layer of competition within the South African rental market, as the demand for affordable rental properties grows.

The rental market good news

But, it’s not all doom, gloom, and decreased incomes in the South African rental market. If you’re looking to invest in property, or purchase your first home, the time may be right to begin exploring your options. Between interest rate drops, and strong competition across the property market, picking up your dream home at an affordable price is now quite possible. Lower interest rates have led to increasingly more affordable bond repayments, and - as always - property is one of the most reliable investments you could ever make.

Whether you’re a tenant or a landlord, the South African rental market is shifting as we move through our lockdown levels. Stay up to date with news and guidance from our Advice Centre.

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