According to the TPN Rental Monitor Residential Sector Q2 report, residential tenants in good standing have recovered from the 73.50 % at the beginning of the pandemic to 80.34 %, almost at pre-pandemic levels. On the other hand, commercial tenants in good standing have gone from 50.36 % at the beginning of the pandemic to 66.54 %, which is still far below prepandemic levels.
The province with the highest rental good standing is the Western Cape with 84.78 %, followed by the Eastern Cape with 84.15 %, KwaZulu-Natal with 80.08 %, and Gauteng with 78.67 %.
Rental Escalations Although inflation has escalated from the beginning of 2021, rental escalations have remained low, with an average escalation below 1 % for the entire 2021, according to the PayProp Rental Index Q2 Report. These rental escalations are significantly lower than in 2019 and 2020.
The graph below shows the weighted average national rental growth rate( year-on-year) versus inflation. Overall, our national rental growth rate seems stable, although under pressure.
So, where does all of this leave you and your property investments? This is my take on our current property forecast and economic outlook.
Firstly, it’ s still a buyer’ s market out there with high supply and lower demand. And people are desperate, so you might just snag a great deal! And once rentals improve again, and they will, you’ ll be ahead of the pack.
Secondly, the rental market is recovering with fewer tenants in arrears and increasing rental growth. And when you buy the right types of properties, property prices are still going up.
Thirdly, interest rates are still low, so buying investment property has never been more affordable. Just think, you can pay less servicing debt and enjoy an increased disposable income with more affordable and easier access to home loans!
Lastly, property is still one of the best investments. Your ungeared return on property( capital growth plus net rental yield) remains much higher than returns on other investments, including the JSE.
Therefore, I am still a champion of property investment and wholeheartedly believe that although the sector appears cloudy at the moment, there is always an opportunity to make it rain.
SA Real Estate Investor Magazine DEC / JAN 2022 21