It was bound to happen sooner or later, but the news that there is a shortage of rental property available in South Africa is proving to be good news for landlords.
A drop in new developments taking place and the clampdown in the various banks’ lending criteria has undoubtedly had an impact on the number of people investing in the property market. Census 2011 recorded that 3.5-million households - or 25 percent of the population - are now living in rented accommodation, an increase on the 18 percent recorded in the 2001 census.
TPN Credit Bureau’s data also indicates that tenants are staying in rental accommodation for longer periods. It was previously recorded that tenants' age spiked at 27 years, when they began leaving the rental market. The current age now peaks at 31 years, which TPN says indicates that tenants are finding the home ownership market more difficult to enter.
The good news for landlords and letting agents is of course that they are in a far better position to pick and choose quality tenants. Tenants on the other hand, appear to have realised that it is no longer simply a case of moving on to greener pastures are coming to the party and paying their rent on time.
The statistics also reflect that 77 percent of tenants pay less than R7 000 rent per month, while 11% pay less than R3 000 per month and 66% of tenants pay between R3 000 and R7 000. The latter category remains the best performing in terms of rent collection where 86% of tenants are in good standing (73% paid on time and in full, with only 6% in the Did not Pay segment). The contrast is stark when compared with the worst performing bracket, where tenants in the above R25 000 per month rental category achieved just 67 percent in good standing (only one in two tenants fell into the Paid on Time segment and 24 percent made a partial payment).
While this is highly encouraging, Michelle Dickens, MD of TPN, urges both landlords and rental agents to perform strict tenant, credit and affordability assessments and apply their credit and application process to all potential adult occupants (both spouses).
These are all undoubtedly positive signs for those considering entering the buy-to-let market. Property prices remain somewhat subdued and the interest rate is low. The situation however, is not going to remain this way forever. Demand drives property prices and given that large numbers of South Africans are itching to get their foot through the property door, prices are going to start increasing sooner rather than later.
The fact that demand is on the rise is highlighted by Statistics SA which recently released information that indicates there has been an increase in the number of residential plans passed. January/February reflected an increase of 20.5 percent year on year, while flats and townhouses increased by 83.9 percent for the corresponding period.
Given all the stats and favourable reports regarding tenants, it may well be time for those who have been sitting on the fence to step forward and take advantage of the situation by investing in buy-to-let properties.
