Buying more popular than renting

People who are looking to rent residential property for the long-term are getting themselves trapped in an unavoidable situation, say analysts.

A recent survey by Statistics South Africa revealed that real estate companies were among those that had the most number of liquidations.

Out of all liquidations between January and May this year, 38 percent were in the financing, insurance, real estate and business services category.

A contributing factor, say experts, was the slowing property market, especially the buy-to-rent market. One analyst says that more and more people preferred to buy rather than rent in spite of increasing property prices.

"People are encouraged to buy houses instead," she says. "They are beginning to realise that renting is just money down the drain. There is no return from it."

Viruly Consulting property economist Francois Viruly says that even though the property market was experiencing high rental activity in retail and industrial markets, this was not the case on the residential side.

"There have also been fewer property developments," Viruly says. "This is due to higher building costs and affordability of rental space at today's prices. The rule of thumb is that a R500000 house should be rented for R5000 a month, but the current practice is to charge twice that amount."

Realty Executives property broker Bobo Khuzwayo says that even though property prices had increased, people's salaries had not moved at the same rate.

Banking group Standard Bank recorded a 24,3 percent growth in house prices last year, while the average salary remained virtually unchanged. According to Statistics South Africa, the average salary between November last year and February this year decreased by 4,3 percent to about R7000 a month.

Sowetan

Article by: Zweli Mokgata - www.sundaytimes.co.za