Real Estate Investor Magazine South Africa July 2014 | Page 26

RENTALS

Tenants Under Pressure
Trends in the rental market

K

eeping an eye on the latest trends in the rental market can give property investors a competitive edge
when selecting properties and when negotiating with tenants.

The weighted average national rental at the end of the first quarter of 2014 was R5,934, up from R5,867 at the
end of the fourth quarter, 2013, according to the latest PayProp Rental Index. “Based on current growth rates, we
can reasonably expect this value to exceed R6,000 by the end of the next quarter,” says Louw Liebenberg, CEO
of PayProp.
The growth rate peaked at a high of 10.8% in October 2013 and is starting to settle at the 8% to 10% range.
Looking at the latest 8.4% year-on-year change in March, this is the lowest growth rate in the last nine months
and the first time in five months that growth fell below 9%.

This is in line with the overall rental index increase of 8.01% for the year, reported in the Trafalgar Residential
Rental Index released earlier this year, which noted that residential rentals increased in every major city in the
country, but dipped well below the standard 10% annual escalations of the past.
While an 8.4% growth rate is still an impressive number, PayProp believes that this is as good as it will get for the year
ahead, and recommends that landlords and agents should see 8% as a realistic increase percentage. Andrew Schaefer,
managing director of Trafalgar, holds a similar view: “It would appear that the days of standard 10% rental increases
are now past with soaring utility increases imposing significant pressure on tenants and constraining affordable rental
increases. Landlords are under increased risk with the majority of consumers resisting increases above the 8% mark.”
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July 2014 SA Real Estate Investor

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