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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2014-11-14

Do you know where Lephalale is known as Ellisras by many, it is a coal-mining town in the Limpopo province. It is also South Africa's most expensive town to rent a property, according to Payprop's third quarter Rental Index Report. Bryanston and Sea Point follow closely behind on the list of the top 20 towns as measured by average rental rate. Musina is in fourth place. The balance of the top 10 are made up, in order, by Camps Bay, Umhlanga Rocks, Hout Bay, Franschoek, Hillcrest and Green Point.


Interestingly the lowest national cost of ownership is also in the Limpopo province, thereby providing those landlords fortunate enough to own property in these high demand areas with a 6,6% net yield after costs. On a national basis the average gross yield is 7% and the average net yield is 5%, with the cost of ownership represented by the 2%. As the average return on cash in a fixed deposit with a bank is around 5%, which represents the no risk alternate to buying an investment property, the anticipated capital growth over time therefore being the premium over the opportunity cost.

The average rental in South Africa is currently R6,192 p.m. This figure is currently growing at a rate of 7,5% (third quarter data) and is forecast by Payprop to be 8% by the end of the fourth quarter of this year. Rental increases in high demand towns are likely to be significantly higher, especially when supply shortages are met by increasingly robust demand. On a provincial level, average rental values in the Northern Cape grew by 11,6% in the third quarter, followed closely by the Western Cape at 11,5%.


In KZN our average rental value is currently growing at 6%. Mpumalanga has the highest average provincial rental at R6,833 p.m. followed closely by Gauteng with an average rental of R6,690 p.m. and Northern Cape at R6,548 p.m. The Free State and North West province have the lowest average rental rates of R4,725 p.m. and R4,440 p.m. respectively. KZN has an average rental rate of R6,284 p.m. - very close to the national average.

Another interesting trend in the rental industry is the growth of the ratio of the damage deposits relative to rentals. Currently at 1,36 times the value of the monthly rental. The trend is upwards and soon two months deposit will be the average. In some provinces such as Limpopo, the average damage deposit ratio is far higher at 2,28 as measured in the third quarter. In KZN the average damage deposit ratio is 1,24. Payprop have for the first time included a break down of the age profile of Tenants and Landlords.


In the Western Cape we have the oldest Landlords at an average age of 56,4 and also the oldest Tenants with an average age of 44,7. The youngest Landords (47) and Tenants (39,1) are found in Mpumalanga. In KZN Landlords are on average 50,8 years old and Tenants 41,9. Across the provinces there is typically a ten year age difference between the Landlord's and Tenants. Another growing trend is the average number of properties owned by a typical Landlord. The national average is currently 1,39.

The size of the residential rental market in South Africa is provided by Stats SA as being 1,6 million households. Only 400,000 or 25% of these are currently managed by estate agents

For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.


Andreas Wassenaar

Seeff KZN Chairman

Principal - Seeff Dolphin Coast

andreasw@seeff.com