Rental demand a story of contrasts in 2010
For many Cape Town letting agents the first three months of this year were some of the busiest they have ever experienced, says David Beattie, a director of the Western Cape Institute of Estate Agents and Principal of Chorus Letting, which manages some a few hundred units between Milnerton and Muizenberg.

“As we moved into 2010 tenant demand picked up noticeably,” said Beattie, “and this caused rents also to move up. Landlords were able to ask appreciatively more for their rent compared to what could be achieved a few months earlier in late 2009.”

A shortage of units in the first half of the year, said Beattie, was compounded by a small percentage of landlords (“not more than 2 - 3% in my estimation”) withdrawing their properties from the market in anticipation of cashing in with lucrative short term rentals.

“That hope was largely unjustified,” said Beattie. “What we learned from this World Cup is that many soccer fans will opt for inexpensive accommodation, in many cases even being content to stay in backpacker lodges or camp sites.”

During the World Cup period itself, said Beattie, rental queries by tenants slowed dramatically as most chose rather to remain where they were rather than risk not finding a property to live in, he added.

“The demand for rental accommodation is again picking up, but as always in winter, the market is relatively slow and is unlikely to burgeon until Spring – but care must still be taken in vetting tenants – there are still many “dicey” tenants, often made redundant by the recession, unable to pay their rents regularly. This makes thorough credit and previous rental checks an absolute necessity.

“Despite a downturn in the buy to rent market, we are seeing signs of increased interest from top-end investors because there is a growing realisation that at today’s prices it is often possible to cover one’s monthly bond repayments in the first two to three years.

“While this is encouraging, it is also true that landlords right now have to be circumspect about asking for rent rises. Although rent increases of up to 10% are still common in certain areas, in other areas, due to an oversupply of units and slow tenant demand we have actually seen new leases signed at 15 to 20% reductions.

“Landlords are also being more tight-fisted about occasional upkeep expenditures. Even small items which cost only one or two hundred rand are now more difficult to get approved. Experienced letting agents are now taking even more care to make sure that tenants are held responsible for their damages.”

“Academic Belt” units in the precincts reasonably close to UCT, Varsity College and other major South Peninsula educational institutions, said Beattie, are now especially sought after – particularly in the months November to December.

“We are told that UCT students are already short of 5 500 beds during term times and that the university plans to raise its intake by another 30 000. This makes any inexpensive rental unit from Woodstock to Wynberg a good buy proposition.”

Quoting just one example, Beattie said that in July/August he might get R4 250 per month for a single bedroom unit in Rondebosch. In January he can, he said, easily ask R5 000 or more for it.

Article by: www.chorusletting.co.za