In many Constantia estate agencies the rental divisions, which quite possibly either did not exist four or five years ago or were relatively small compared to the sales activity, have in recent years become a major money spinner and a core activity.
This, says Linda Stringer, a rental partner at Rawson Property Group’s Constantia franchise, is definitely what has happened at Rawson Constantia. Growing demand and on-going enquiries from the public have, she said, led to this franchise now handling a growing portfolio of rentals, a large percentage of which are done on a permanent, fully managed basis.
“The simple truth,” said Stringer, “is that landlords are now in the pound seats. Rentals are rising by 7 to 8% per annum – and when a new tenant is installed it might well go up by 12 to 15%. In our franchise area (which covers Constantia and its surrounding areas), rentals can vary from R5,000 to R65,000 per month. In Wynberg, for example, a two bedroom apartment will rent at R5,000 to R6,000 per month and a three bedroom apartment from R7,000 to R10,000 per month. A two or three bedroom home in Bergvliet or Meadowridge might well rent at R15,000 to R20,000. In Tokai a three bedroom home will on average rent for R23,000 and in Lower Constantia the average rental would be even higher, say R25,000 per month or more. In Upper Constantia many rentals are now over R35,000 and, as indicated, they can go up to R65,000 or more per month, although the more expensive the home the longer it takes to find a tenant.”
Right now, said Stringer, many potential home sellers are renting their homes out for two to five years in the expectation of prices rising significantly over that period. In some cases they move on to second homes, while in others they rent elsewhere (often close to schools), thereby bringing down their monthly overheads. It is quite common, she said, for owners of big homes to settle for living in a rented apartment for a time.
Asked to what she attributes the big increase in demand for rentals, Stringer said that since the recession many people have impaired credit records which prevent them, at least temporarily, from getting a bond and renting gives them time to rectify the situation with the credit bureau. The demand is also, she said, driven by the rise of the 25 plus young managerial set who, although often high earners, have not yet got together a deposit. Corporate transfers also provide Rawson Constantia and other agencies with tenants where the rentals are often being paid by the employer.
The demand, Stringer expects, will continue to push up rentals at a very satisfactory rate and predictably it is, therefore, leading to a steady influx of buy-to-rent investors, many of whom now appear to think that the JSE is heading into overheated territory. The shrewder investors, added Stringer, tend to focus on the lower middle and lower end of the market because it is now a recognized fact that the lower the price of the property, the closer the rental will come to covering the investor’s bond repayments.
At the moment, said Stringer, like every agency in the Constantia Valley, Rawson Constantia is experiencing a severe shortage of rental stock. Demand, she added, is particularly strong in the R10,000 to R30,000 bracket as well as in the sub R10,000 bracket.
Many buy-to-let investors, said Nancy Todd, who supervises the Rawson Property Group’s Constantia rental division and who is a co-franchisee with Eugene Pienaar, prefer to leave the administration of the rentals to an agent and certain agencies have now established a reputation for being extremely vigilant in checking credit records, previous tenant performances, employment and salary details and other aspects which could affect their performance as tenants. If these checks are done thoroughly, said Todd, it is possible to have virtually no defaulting tenants and never to be involved in eviction procedures.
“The current shortage of stock,” said Todd, “will not be alleviated in the foreseeable future, which means that those who have invested in rental property here are currently in a very strong position.”