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Bugle Sales Talk Editorial

Bugle Sales Talk Editorial

Author: Andreas Wassenaar
Date: 2016-02-12
Payprop recently published their very comprehensive annual rental index and market report for 2015, which provides a very comprehensive and well-researched look at the South African rental market. As a buy-to-let investor this is of particular interest to me and provides perspective on where KZN fits into the national performance and where the rental sweet spots are to be found.

Payprop teamed up with prominent economist Mike Schussler to create the rental index and report which tracks actual transactions between tenants, landlords and estate agents as the basis for its analysis.

In terms of average national rentals the Northern Cape was the most expensive province in which to rent a residential home as measured in the fourth quarter of 2015 with an average rental of R7,438 p.m. Close behind was the Western Cape at R7,161 and then Gauteng at R7,061. KZN was fourth of the nine provinces with an average rental at R6,967. The cheapest place to rent in the country is in the North West province with an average rental of R4,703.

The get an understanding of where the migration is happening on a national level, the growth rates of rental values help us understand where the hotspots are. The top growth rate provinces are firstly the Northern Cape (11,4%) followed by the Western Cape but with slowing growth rates (from 10,9% to 9,5% to 8,4% over the past three quarters). The rising star seems to be KZN with its rental values growing by 8%, 8,2% and 9,4% over the last three quarters. Gauteng has been reasonably flat with a drop to 5,8% in the last quarter, although this was preceded with three quarters of steady growth rates of 7,9%, 8,2% and 8,6%. The disaster areas have been Mpumalanga (-2,9%), Limpopo (3,3% in the last quarter but negative growth rates preceding this).

In terms of the price categories of rentals on a national basis, the two dominant price categories are R2,500-R5,000 p.m. (32,6% of all rentals) and R5,000-R7,500 p.m. (31,7% of all rentals). The latter has been growing sharply at the former's expense. Sharp increases have also been seen in the R7,500 - R10,000 bracket and believe it or not, rentals over R15,000 p.m. grew by 40% even though these rentals make up a small portion of the overall number of rentals. If we are to look at the fourth quarter of 2015 on a national basis and break down the rentals within their price categories then only 4,8% are above R15,000 p.m.; 9,1% are between R10,000 - R15,000; 13,6% are between R7,500 - R10,000.

For those living along the Dolphin Coast you will tend to find that our average rental rates are above the national averages and our sweet spot is within the two categories from R7,500 p.m. to R15,000 p.m.

The research on rental yields on a national basis indicated that the highest rental yielding province is Limpopo with yields of 8,12%. Mpumalanga and Northern Cape follow with average yields of 6,25% and 6,22%. KZN takes up a respectable fourth position with average yields of 5,22%. The report also looked at the overall average rental gross and net yields. For the fourth quarter of 2015 these were 7,11% as a gross yield and 5,03% as a net yield after costs. It is therefore interesting that this study indicates that approximately 2% of the gross yield will be attributed to the average costs as a general rule of thumb.

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

Andreas Wassenaar

Principal - Seeff Dolphin Coast

Cell: 082 837 9094

andreasw@seeff.com