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Which areas have the best tenants and highest rentals?

Private Property South Africa
Tahir Desai |
Which areas have the best tenants and highest rentals?

2014 ended on a positive note for landlords and rental agents, with 86% of residential tenants recorded as being in Good Standing.

This figure is made up from 3 of the categories into which TPN indexes rental payment profiles: Tenants who paid on time, as well as those who paid during the "grace period" (the first 7 days of the month) and those tenants who paid late.

This figure constitutes good news for the industry, as the 86% good standing ratio achieved over the past 3 quarters of 2014 remains the highest on record.

Rent by Value

TPN has categorised rent into 5 distinct price brackets: Tenants who pay less than R3,000 basic rent per month, the R3,000 to R7,000 bracket, the R7,000 to R12,000 bracket, the R12,000 to R25,000 bracket and tenants who pay more than R25,000 per month.

In these brackets 83% of tenants rent for below R7,000 and 13% rent between R7,000 and R12,000.

Rental Escalations

Rental escalations are currently at 6.49%, coming off a peak of 8.6% in Q4 2013.

Notably the Northern Cape and Free State are recording double digit escalation 15.42% and 13.14% respectively.

Limpopo, although still commanding top spot in terms of average rental prices, only achieved an average escalation of 0.82% in quarter 4, possibly indicating a cooling off from double-digit growth for the previous 5 quarters.

In more “stable” provinces, where fracking, mining or construction of the Medupi power station are not driving prices higher, as in smaller regions with limited supply, the rental escalations are muted, such as Western Cape (3.43%), Gauteng (5.65%) Kwazulu Natal (2.44%).

Eastern Cape (9.57%) is an interesting example where East London has limited rental stock driving escalations, compared with lower increases in Port Elizabeth.

National average rental price

The national average rental price is currently R5,620.

Interestingly, Northern Cape, Limpopo and Mpumalanga lead the pack with average rental prices of R6,306, R6,087 and R6,042 - caused by limited rental stock and over-supply of 'out of town tenants' attracted by fracking, mining and construction of Medupi.

On the other hand, the Western Cape, Gauteng, Kwazulu Natal and North West achieve an average rent of R5,952, R5,930, R5,516 and R5,052 - compared with the more subdued prices of Eastern Cape and the Free State at R4,818 and R4,877 respectfully.

Ideal rental price range

TPN notes the "sweet-spot" for residential rentals remains the R3,000 to R7,000 rental category, with 61% of tenants renting in this price range, resulting in consistently strong demand for properties. Importantly the rental payment profile is also a healthy 88% of tenants in good standing - and the least number of tenants in the 'did not pay' category, at only 4%.

In addition the R7,000 to R12,000 value category is also a growing bracket with 13% of tenants in this price range. Significantly 89% of these tenants are in good standing with an impressive 76% paid on time and only 4% in the did not pay category.

Entry level rentals, those below R3,000 (80% in good standing) and the upper end of the market, those above R25,000 (81% in good standing) continue to fare worst but for different reasons. The entry level bracket records the highest percentage of tenants who simply do not pay, at 9% (nearly 1 in ten tenants) while the upper end of the market struggles most with late payments (16%).

Rental by province

Western Cape continues to outperform the overall market with 89% of its tenants in good standing. What makes this figure even more impressive is that 79% are tenants who paid on time - placed in perspective against Gauteng which only achieving 68% paid on time.

At the other end of the table, just 78% of tenants in the Free State are in good standing.

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