Residential rental cost rising rapidly
South Africa’s residential rents are continuing their rapid rise, with the Trafalgar national rent index rising by an annualised 12.5% to 153 in the first half of 2008 as the home buying market falters.

Significantly, the rise is 100% up on January to June 2007’s 6.2% annualised rental increase.

"A pattern seems to be emerging of rents rising faster in the second half of the year," said Andrew Schaefer, MD of Trafalgar, the national property manager that produces the index.

"It looks like tenants face substantial double-digit annualised increases for the rest of this year," he said.

Double-digit increases have already hit tenants in East London (with an annualised 18% rise), Port Elizabeth (12%), Pretoria (11.5%) and greater Durban (10.5%). Johannesburg rents rose an annualised 18% from June to December last year.

Pretoria had a big turnaround from -3% to 11.5%. Cape Town nearly quadrupled its increase, from 4% to 14%. Schaefer said that national rents were rising faster than the price of sectional title units, the biggest rental sector, after nearly a decade of lagging price increases.

"The Lightstone average price for a sectional title property to date in 2008 is 669,000 rand with a current bond and levy ownership cost of about 140,000 rand/year - a price to holding ratio of six," he said.

"The average rent for a two-bed flat is about 60,000 rand/year, almost half the cost of owning. This makes the price to rent ratio 11. Working on long term interest rate trends, my rough guess is that the ratio should be between seven and eight. So rents still have a long way to go."

Article From: