News from - Rodney Hayter
Rodney Hayter

South African residential tenants face double digit rent increases for a decade or more as households that rent are formed quicker than new rental units can be built, according to Andrew Schaefer, MD of Trafalgar the national residential letting company.

Rental demand is being pushed up by rapid migration of people from the country to the cities, plunging household sizes, and the lifestyles of young people who want to be free to move from city to city at will, he adds. But slowing private investment in rental accommodation as rising prices push down yields and rocketing building costs slow down the development of new units is hampering supply.

"Ironically, everything is in place for a very healthy South African residential rental market in the future," adds Schaefer. "Buy-to-let investment is entrenched as a significant investment asset class. The country's falling investment yields mean that private landlords will accept very moderate rent increases once supply and demand are in equilibrium. They are also building up a stock of accommodation that gives people who want to rent a lot of choice and accommodation they can rent for the long term and turn into a home

"Rapidly growing urban populations and household sizes falling from nearly five people to less than four, means rental demand could rise by 10% or more a year over five or more years.

"But supply is going to be a major problem. Rising property prices and building costs have now interrupted the progress of supply in middle and high rent areas again, although it seems that Johannesburg and Pretoria inner city conversion from office to residential rental will continue."

"Many South Africa tenants come from traditions of very low rents in townships that cost as little a 5% of household monthly income. That is not unlike Britain in 1910 when 90% of households rented from private landlords at a cost of 10% to 15% of household income. But today, tenants in Britain, Germany and other European countries pay up to 50% of the income on their accommodation, which Schaefer believes SA tenants are heading towards.

Article from: www.rodneyhayter.com