Rental demand in the northern Johannesburg suburbs is now considerably higher than it was during the height of the South African property boom in the mid-2000s. This is according to Chris Renecle, MD of Renprop, who says that the decrease in supply of sectional title properties in the northern Johannesburg suburbs has led to an increase in demand that has therefore put upward pressure on rentals.
There are other factors influencing the rise in rental demand. Renecle points out that another factor contributing to the continual high demand for rentals is the fact that people can seldom gain approval on 100% bonds, which means that many would-be homeowners have to look at renting instead of buying.
“From an investment perspective, those who are still investing in rental property portfolios despite having to put down equity are enjoying good returns due to the decrease in supply.” Renecle says that supply has partially dropped off as developers – many who were burnt with an oversupply of stock during the downturn – no longer build unless they are sure that they can sell the units. “In the mid 2000s, sales were secured on 100% bonds with no equity put down, which made it a lot easier for developers to produce stock,” he says.
The continually increasing demand for rental units in northern Johannesburg has also led to many property companies coming into the market who are working purely with rental stock. “Some developers are also only producing rental stock, which is indicative that investors are seeing value in residential property investment,” says Renecle. “Renprop, for example, has expanded its offering to include rental asset management for its clients, due to the high levels of demand for sectional title rental units.”
The increase in demand for rental properties has also meant that rental prices are increasing, and will continue to do so, especially in the northern Johannesburg suburbs, until demand is met with sufficient supply, says Renecle. He points to the PayProp Rental Index, which, based on the analysis of just over 2.5million transactions in South Africa, showed the weighted average national rental at the end of the first quarter of 2014 was R5 934 – up from R5 867 from the fourth quarter of 2013.
The PayProp Rental Index report noted that the expectation was for the national rental average to exceed R6 000 by the end of the second quarter of this year.
Renecle says that in the northern suburbs of Johannesburg, the strongest demand is for two-bedroom units, or those with a monthly rental from R6 500 to R9 000.
“Rent will continue rise as long as tenant numbers outstrip supply of available property,” says Renecle, who notes that Renprop has launched and successfully sold a number of sectional title residential projects in the northern Johannesburg suburbs, which have been snapped up quickly by investors and those who have been able to secure bonds. To cater to the demand for rental properties in the northern Johannesburg suburbs Renprop is set to break ground, together with its development partners, on at least three new apartment buildings in the coming years.
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