The Southern Suburbs are currently experiencing a softening rental market as average rental rates have dropped by 36% over the past few months. Many landlords in the Southern Suburbs are lowering their rental rates for the first time in several years to avoid creating vacancies.
The property market is being hit by the mixed economic outlook currently being experienced in South Africa. Although the market will recover, the rental sector is likely to drop some more. This is because tenants are starting to find that rental rates are unaffordable due to the economic pinch.
Tenants are feeling the pinch
“We are still finding landlords coming to us from other agencies hoping that we can find them a tenant willing to pay high rental rates. Unfortunately, tenants are facing financial pressure due to the rising costs and result of the overall economic decline,” says Seeff estate agent Imtiaz Adam.
For example, a two-bedroom apartment in Claremont would normally have a rental value of R15 000 per month. At the moment the average price for the same apartment is around R11 500 per month. In Plumstead, a one-bedroom flat that would normally fetch R7500 per month is now being marketed for R6500 a month.
"We are also finding that, rather than upgrading to better accommodation, many tenants are staying put and renewing their leases on their current premises,” says Adam. “Another fall-out from the market decline has been that we have had a few incidences of lease cancellations per the CPA where tenants could no longer afford the rental and had found cheaper accommodation elsewhere,” he adds.
Landlords need to adjust the rent to avoid vacancies
Landlords need to take the financial crunch into consideration when determining annual increases in rent. Monthly rent in the Southern Suburbs is currently going to be at least R1000 or cheaper for tenants looking to relocate.
To avoid rising vacancies, landlords need to adjust their rentals accordingly. The demand is still there, but tenants are looking for cheaper rates as there is an abundance of supply in Cape Town.
Other suburbs are also slowing down
Other areas of the city are also experiencing a slowing market. The Atlantic Seaboard and the City Bowl are also being heavily affected by the economy. FNB’s property barometer shows that prices of property on the Atlantic Seaboard have grown by 2.5% in the first three months of 2018. In the same period of 2016, the price growth was 27.5% - a full 25% more than this year’s growth.
The City Bowl is fairing slightly better. Property prices have increased by 10% in the first quarter of 2018, but in 2016 the growth was 23.6%. One cause is the slowing of in-migration from other parts of South Africa. The water crisis has dissuaded citizens from moving to the Western Cape until the situation is properly rectified.
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