An unprecedented demand for rental properties along Cape Town's Atlantic seaboard has resulted in a shortage of stock across all areas and price ranges. Last year rentals increased from between 6 and 10%. Currently, the sector is seeing a 12 to 20% increase year-on-year depending on the area.

Jawitz Properties' Atlantic seaboard rental consultant, Linda Segal, says the recession has played a major part in this trend as many property owners were forced to sell and opted to rent. "Interestingly, the demand for unfurnished property is greater than that for furnished units," she says.

Despite the rising numbers of repossessions in the property market over the past 24 months brought on by the recession, property-to-let-owners are doing better than ever. This has resulted in a surplus in demand and deficit in supply. Local demand has more than made up for the falling off of interest from overseas markets, where budgets were slashed. The exchange rate has also added to a decrease in demand from abroad. This would explain the increased demand for unfurnished rentals, as the overseas market tends to prefer furnished units.

The mid and lower sectors of the market have shown greater growth than high-end properties, particularly for apartments in the R5 000 to R8 000 price range. Rentals below R5 000 per month remain resilient, but in the R6 000 - R8 000 price bracket one or two bedroom units are becoming scarce.

Houses, cottages and flats up to R16 000 pm are in demand, possibly due to the hype associated with the World Cup and it's likely that this will continue to spike rentals making them ultimately unaffordable. In fact, some owners are asking as much as R10 000pm for a two bedroom apartment. However, the residential rental market in the Atlantic suburbs appears not to have been unduly affected by the World Cup and some agencies have stopped listing properties altogether.

Segal cautions that when considering buy-to-let, owners should ensure that the rental costs are market related and affordable. The tenant's credentials should be thoroughly checked to ensure that the monthly rent can be met. This should not exceed a third of the tenant's monthly budget/income and the onus is on both lessor and lessee not to get involved in a lease that is not viable from the outset. Interestingly statistics show that during 2009 the highest risk bracket fell in the income group earning around R25 000pm, and not the lower earning income groups, as would be expected.

"Landlords, who, for one reason and another find that they are unable to undertake the letting process themselves should consider enlisting the help of a rental consultant who can manage the property on their behalf. Inexperience can cause a major setback and professional advice from the start will pay dividends in the long run and ensure that the investment meets expectations," says Segal.

Many owners fail to factor in their property's maintenance costs. Refurbishments should be done every four to six years. In addition, there are sectional title levies, rates and householders' insurance as well as a bond if it is not a cash purchase to be taken into account. Tenants are responsible for damages they cause either by negligence or intent. An owner is responsible for structural maintenance and repairs.

"Interest in the buy-to-let market has grown significantly during the past year. Now is the time to buy. However, residential rentals should be viewed as a long-term investment, taking between five to seven years to realise real capital growth," she says.

Article by: Jawitz Properties - www.realestateweb.co.za