As expected, rental data for the second quarter of this year continues to reflect the economic challenges resulting from the Covid Lockdown. Seeff’s rental agents report a lot of movement in the rental market with many areas still grappling with the economic fall-out of the lockdown.
The latest PayProp Rental Index shows that rental growth rates remain muted and well below previous quarters. Challenges remain for landlords and tenants.
Rental growth by mid-year averaged just 1.6% y/y. The market is currently still buckling under a number of factors ranging from an oversupply of stock in some areas to tenants who have lost their income or face reduced income. Many landlords have given concessions, but it is often not enough and tenants have to relocate.
Regional rental growth
The North West rental market came out on top in terms of growth for Q2 of 3.9% compared to 3.8% in Q1 followed by the Northern Cape with growth of 3.7% for Q2 compared to 3.6% in Q1.
Three provinces experienced negative growth, being Limpopo where prices declined by 3.7%, KwaZulu-Natal which declined by 1.6%, and the Western Cape by 0.04%.
Regional rental prices
The national average rental amount for the second quarter stands at R7 746, slightly up year-on-year from R7 631 in 2019. The average rents for the Western Cape, Gauteng, Northern Cape and KwaZulu-Natal was still above the national average.
The average rentals for the various regions stand at:
- Western Cape, R9 022
- Gauteng, R8 344
- Northern Cape, R8 081
- KwaZulu-Natal, R8 037
- Mpumalanga, R7 463
- Limpopo, R6 962
- Free State, R6 455
- Eastern Cape, R6 052
- North West, R5 235
Seeff’s perspective on the Airbnb market
Vivien Adler, rental agent for Seeff Atlantic Seaboard notes that the market remains challenging, especially the Airbnb market which will only recover once local and international travel is back on track. Generally, rental prices are hugely reduced, a lot of tenants are downscaling to smaller, cheaper properties and we still have tenants asking for rental reductions.
In the City Bowl, there has also not been a major pick-up in the Airbnb market as yet according to Craig Watchhurst.
Sonya Garisch and Jacqui Bush, luxury rental agents for Seeff Constantiaberg meanwhile report that while the market is buoyant, rates remain under pressure. Rentals have decreased by approximately 25% since lockdown commenced and tenants are looking for better value. Landlords should keep rentals at the current rates. The rental market is busy and will pick up as summer approaches.
Adrian Louw, sales manager for Seeff Century City says that they are definitely seeing first-time buyers exiting the rental market to take advantage of the low interest rate. Many tenants are not renewing their leases, opting to buy instead.
Here too, rental rates remain under pressure and landlords will have to keep that in mind and keep rates flat to retain good tenants. It is better to take a small financial loss than risk your property sitting vacant because we are in uncertain times, he says. The market is still flooded with furnished rentals making it very competitive and driving down prices substantially.
Jo Giraudeau, rental and operations manager for Seeff KZN South Coast notes that agents across the region are also seeing some tenants taking the opportunity to buy their first home. The rental market remains active and stock is moving if priced correctly although some areas still have high stock levels.
The lifting of travel restrictions should hopefully result in some good uptick in holiday bookings across the coastal areas.
Author: Gina Meintjes, 25 September 2020, Rentals