The rental market is thriving. The TPN Credit Bureau’s Residential Rental Monitor Q3 2023 reveals that aside from the 81.73% of tenants that are in good standing (meaning they pay on time), the mid-range rental demand is growing (R12 000 - R15 000 per month), having almost doubled since 2016. Further good news for renters - not so much for landlords - is that rental escalations are sluggish, which indicates that while tenants are willing to pay a slightly higher rental, a fine balance needs to be struck by landlords between a potential vacancy vs increase in the lease payment.
Rental statistics like these have come to the fore over the past two years since the interest rate hike cycle began post Covid-19. People who had been tempted to buy a property when the interest rate was lowered in 2020, may, however, be glad they made the decision to continue to rent, and for many reasons.
“Data from our portal suggests that there is an uptick in rental demand in the last quarter. We saw an 11% increase in rental inquiries from individuals aged 25-34, and a 16% rise from those aged 35-44, predominantly from female renters,” – Theo Mseka, Chief Operating Officer at Private Property.
The benefits of renting speak for themselves:
Flexibility: Renting presents opportunities for tenants to adapt to changing circumstances, be that in their financial health, choice of accommodation, or area of residence.
Short-term lease: Because rental lease agreements can be negotiated, renters can explore different suburbs while they make a decision about where they would like to live on a more permanent basis. Short-term leases are also ideal for working nomads, who are not restricted by the need to be in an office environment, or may need to move around the country regularly. It is the same for those who work-from-home and use digital technology to stay in touch with their colleagues and clients.
Lower risk of market fluctuations: The residential property market is subject to the same fluctuations and economic uncertainties as any industry. Renting offers a level of protection against these volatilities as rental terms are usually fixed for a set lease period, which allows renters to budget accurately.
Financial burden minimised: Compared to the purchase of a home, renting a property involves lower upfront costs such as builders insurance or security systems. During a rental period, savings can be realised and financial goals achieved.
- Maintenance-free responsibilities: Tenants are not responsible for major repairs or maintenance costs, which are the responsibility of the landlord. This can have a huge impact on savings, more so for those saving to buy a home.
Time-savings: Without the worry of maintaining a home, a renter will have more free time to pursue other interests, stress-free.
Experience and knowledge: First-time home buyers are provided with the time to acquaint themselves with the residential property market, gaining an understanding of what is required to service a home.
Rental for existing homeowners: For those who already own a home but work in a different province or a city that is far from this base, renting options vary from affordable one-room or backyard properties, to high-end apartments or luxury homes. There is a market for everyone.
Retirement solution: Baby boomers who have not built up enough capital to live on for the rest of their lives, may enjoy rental as an option. This allows such individuals to free up capital from the sale of a family home as empty-nesters, among many other reasons. Money in the bank, rather than being tied up in an asset that can be costly in terms of maintenance, can subsidise other important monthly costs like medical aid, or facilitate a much-desired vacation.
Shared living costs: Co-living or sharing a rental property with a like-minded individual allows renters to choose a rental property that they may not be able to afford on their own.
Current Rental Market Trends
Renting is a practical, viable alternative to homeownership and one that caters for lifestyle choices of a diverse number of individuals and families. While homeownership will always be considered as a solid and long-term investment, renting provides the greatest freedom of choice.
Mseka adds, “Regionally, in Gauteng, Pretoria, and Midrand have emerged as hotspots for rental activity, recording the highest percentage increases in tenant interest. This is closely followed by the Western Cape with Cape Town - indicating a broader geographical spread of rental demand across South Africa's major urban centers”.
In essence, the rental market in South Africa is evolving rapidly, driven by demographic changes and new tenant preferences. For stakeholders, understanding these dynamics is crucial for navigating the market effectively and leveraging the emerging opportunities in this dynamic sector.