Seeff has good news if you’re a landlord or property investor: With COVID-19 a thing of the past, Samuel Seeff, chairman of the Seeff Property Group, predicts a promising 2023 for the South African rental market.
The market’s resilience is apparent as many of the COVID-induced challenges on the property market now appear obsolete.
Rising interest rates, inflation, Gross Domestic Product (GDP), and high cost of living have prompted tenants to seek a more affordable alternative to buying: renting. However, landlords and tenants alike should take heed of the warning from John Loos of First National Bank (FNB): the economic impact of higher interest rates will likely continue to keep rental escalation rates under pressure.
The Western Cape has long been a popular destination for prospective tenants, which has led to an influx of people to the province. Over 300,000 people have moved to the Western Cape between 2016 and 2021- significantly more than Gauteng, the Eastern Cape, and other locations.
This wave of migration and its positive impact on the Western Cape's residential sales and the rental market is encouraging for property investors.
The latest TPN Rental Barometer reveals that rental growth in the third quarter of last year was 3%, higher than GDP growth but lower than the Consumer Price Index (CPI) rate of 6.9% in January 2023.
With rental yields remaining below inflation, Loos explains that this could be why the buy-to-let property sector only accounted for 6% of sales over the past year. When the county returns to a GDP growth of 3%-4%, Loos believes we will see higher investments in the rental market.
The average monthly rental has increased to R8,023, compared to R7,800 in the first quarter of 2022. However, the average rental costs differ across the country. Seeff provides the following breakdown:
It's encouraging to note that the number of tenants in arrears is now at 18.3%, its lowest level since the pandemic began. While this is a significant improvement, Seeff cautions landlords to remain vigilant, as it remains to be seen how higher interest rates and inflation will affect tenant payments as the year draws on.
As the rental market recovers, you might consider property investment and renting out homes to tenants. While it’s not without risks, there will always be demand for homes, making residential property a fine investment choice. Seeff offers a comprehensive list of property investment tips to guide aspiring landlords in South Africa.
With Seeff’s expert advice, you can enter the property market with up-to-date industry knowledge and insights.