Young professionals currently dominate South Africa’s residential rental market
South Africa’s residential rental property market has undergone a tumultuous journey over the past few years, with the COVID-19 pandemic and economic struggles leaving a lasting impact. Now in 2023, Seeff reports a glimmer of hope for landlords and property investors as the rental market shows signs of recovery. Rental property investment is once again an appealing prospect.
The residential rental market in South Africa is on an upswing, especially in major metropolitan areas like Johannesburg, Cape Town, and Durban. Driving this growth is a surge of eager tenants, generally, young professionals and students, who want affordable rental properties near their workplaces or universities.
But there's more. Due to the economy’s fragile state and the high property acquisition cost, more tenants are also choosing to rent for more extended periods. This is good news for landlords seeking peace of mind and stability from predictable and continuous rental income.
Rental Property Investment: A Look at Rental Rates
The cost can vary greatly when renting a place to call home in South Africa. From location to size and condition of the property, there are several factors for landlords to consider before they can set a reasonable rental price and attract prospective tenants.
However, Seeff confirms that rental rates have remained relatively stable over the years, with only some areas experiencing an uptick in prices.
- Consider Johannesburg, for example. The average rental rate for a one-bedroom apartment is currently around R7,000 per month, and a two-bedroom apartment will set tenants back around R10,000 per month.
- In Cape Town, you can charge a higher rate due to the high demand for rental properties and the semigration trends. Rental rates in the Mother City are around R8,000 per month for a one-bedroom apartment and a two-bedroom apartment costs around R12,000 per month.
Provinces such as the Eastern Cape, Limpopo, Mpumalanga and North West offer some of the cheapest rental rates in the country. For tenants seeking a compromise between price and location, Gauteng still offers plenty of affordable areas.
Rental Property Investment: A Look at Vacancy Rates
The mere mention of “vacancy rate” can alarm a landlord. No landlord or property investor wants their residential property to experience high vacancy rates, which can quickly deplete their income.
The good news is that the South African rental market has managed to maintain a stable vacancy rate over the past few years, sitting at an average of 7% to 8%. This positive sign indicates a strong demand for rental properties, especially in highly sought-after, bustling urban areas.
Nonetheless, certain neighbourhoods are plagued with higher vacancy rates, often due to tenants' economic or social difficulties. If you are a landlord with property in a less desirable neighbourhood, it is imperative that you lower your rental prices or offer more incentives to attract and retain tenants.
Rental Property Investment: Landlord and Tenant Relations
In South Africa, the bond between landlords and tenants is defined by the Rental Housing Act, which clearly stipulates the rights and responsibilities of both parties. This critical legislation is the cornerstone of resolving disputes.
The rental market in South Africa is recovering, and the latest rental barometers suggest a robust and stable environment for all involved. Yet, it's not just about stability, as there's an insatiable appetite for affordable rentals, and tenants are increasingly seeking long-term commitments from their landlords. This creates a win-win scenario where both parties have opportunities to seize.
Should You Make a Rental Property Investment?
Success in the realm of property investment requires careful consideration. Property prices can fluctuate dramatically depending on location, making it crucial to research the local rental market meticulously. Only by ensuring that rental income will be sufficient to cover expenses such as mortgage payments, property taxes, and maintenance costs can you truly reap the rewards of your investment.
But that's not all - landlords in South Africa must navigate a time-consuming web of rental laws and regulations. This can be daunting.
Investing in rental property in South Africa is an exciting prospect that could lead to lucrative returns and opportunities for growth. As the demand for rental properties soars, it is easy to get swept up in the potential for steady rental income and impressive long-term capital appreciation.
We encourage you to contact our expert Property Practitioners for guidance before deciding. Let us help you navigate the complexities of the rental market with our landlord services and secure a sound residential property investment this year.
Read our blog on best property investment tips for further assistance.
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