South African households remain under severe financial pressure and continue to feel the credit pinch due to a weaker rand, rising food and fuel costs, increases in household utility costs and additional e-tolling fees.
The 2014 outlook for the indebted consumer is not showing any sign of improvement, as the price of rental property is also expected to increase during the year. The demand for rental property will continue to rise, especially on properties well placed to take advantage of improved public transport infrastructure. The rental of properties will increase as demand for them drives up their yield, and what you save on transport, you will eventually pay towards rent.
Adam Kane-Smith, Managing Director at Seedstone Fund Advisors, says “Only very specific areas of the residential market will beat the average yield achieved by the property sector, specifically some student accommodation and cleverly chosen property locations where there is a market shift in demand and desirability.”
Trends landlords should consider when investing in rental property
The prospect of an interest rate hike and the fact that many homebuyers are having difficulty raising bond finance will be a further boost in the demand for rental property, as fewer people can afford to buy their own property and will rather choose to rent.
According to Andrew Schaefer, MD at Trafalgar Property and Financial Services, the rental market is cyclical and usually busiest at the beginning of the year when people tend to move thereby giving up their old leases, or, students start looking for accommodation close to universities. “The availability of rental properties is at a historic low in terms of vacancies when it should be the busiest period of the year. Good quality properties with a good location are hard to find as tenants tend to stay on in order to avoid moving costs, together with challenges of finding suitable alternative vacancies. Whilst demand has been strong in the last two years, supply and availability has been low.”
Martin Goodman, Director of Rentshield, warns that landlords should take note of the immense financial pressure households are currently facing, and mentions that a property letting management tool like Rentshield is hugely appealing to landlords. According to Goodman, “Rentshield takes care of many property investment risks associated with letting a property on behalf of the landlord. The tool protects them against late rental payments, as well as loss of rental income for up to three months.”
Other benefits Rentshield offers include an online tenant vetting facility, in and out inspections, taking ownership of the eviction process and covering the legal fees of up to R50 000, protection from unpaid utility and electricity bills and any malicious damage to the property for up to one month’s rental.
Considerations for tenants
With rentals and all other accompanying costs on the rise, tenants can expect to dig deeper in their pockets for a deposit towards that cosy house or apartment they so badly want to call home. However, Rentshield alleviates the need for a deposit with its “zero deposit” product offering that is mutually beneficial to all parties involved in the rental process.
“This residential property tool negates the need for a hefty upfront deposit which makes securing the home of your dreams more accessible,” Goodman adds.