PROPERTY: Activity in Top-End Rentals Market
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It is not just the top end of the residential property sales market that is experiencing high levels of activity at present. Pam Golding Properties reports that its Western Cape rentals division is also seeing an unusual flurry of activity, with significantly high prices being achieved for rentals of top-end properties in the Southern Suburbs and along the Atlantic Seaboard in particular.
PGP’s Western Cape rentals director Dexter Leite says there has generally been a marked increase in demand for rental properties throughout his region, but adds that his division has never been this busy at the top end. In the months from July to October 2008, deals closed by his division included R63 000 per month for a house in Camps Bay, three properties in Constantia for R35 000 per month and over, and a staggering R120 000 per month for an ultra-luxurious house in Bantry Bay. PGP also secured rentals of R43 000 per month for another home in Bantry Bay, and R29 000 per month for a house in Higgovale.
Leite says the demand is coming from numerous sources, including businesspeople relocating to the Cape with their families, who wish to rent while getting a feel for the city and identifying where they eventually want to buy. Current market conditions have also seen an increase in property owners choosing to renovate rather than sell their homes, and many of them seek out short- to long-term rentals while major work is being carried out on their own properties. Foreigners and ex-pats also contribute to the tenant database, with many of them enjoying the flexibility of renting, which enables them to move on quickly, without being tied down to the country or to a particular area. Other attractive aspects to renting are the absence of rates and taxes and mortgage repayments, and the fact that most maintenance is the responsibility of the owner, not the tenant.
The lower price ranges have also seen an upsurge in rental activity thanks to the impact of the current interest rate climate and the National Credit Act, which have made it significantly more difficult for some potential home buyers to qualify for mortgages. As a result, these would-be buyers are being forced into the rental market instead, as the NCA does not apply when assessing ability to pay rent.
Leite says it is clear that some home-owners are struggling to keep up with their bond repayments in the face of higher interest rates, and as a result, many are considering letting out their properties. However, he cautions that while these owners may see renting as a means of covering their increasing bond costs, this is not always the case. “Would-be tenants are becoming more astute,” he says, “and are shopping around for the best deal, knowing that there is increased availability of rental stock. They are simply not prepared to pay exorbitantly increased rentals – unless of course they are choosing to rent in a premium area, where high demand can justify higher rentals. It is also worth remembering that prospective tenants are becoming very discerning about how far away they live from work, due to the high cost of fuel.”
Meanwhile Leite has urged home-owners who are opting to rent out their properties, to be extremely discerning in their choice of rental agency. “With the slow-down in the sales market and the subsequent buoyancy in the rental market, we have seen a proliferation of new rental agents,” he says. “It is worth taking a second look at their track record before placing your property in their hands - for example, one should assess whether rentals is in fact a core focus of the agency, or merely an add-on which is expedient in the current market. One should definitely ask how many leases the agent has recently concluded in the area in which your property is located, and ask to see proof that they have a valid Fidelity Fund Certificate. It is also worth probing their screening procedures for potential tenants, to ensure you do not get saddled with a problem tenant. Established rental divisions such as our own at PGP are not only backed up by years of experience and in-depth area knowledge, but will be able to offer a higher level of administrative support, ensuring that rentals are collected on time, rates and levies paid, and maintenance issues (in the case of managed rental properties) handled appropriately and timeously.”
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