Towns including Lephalale (previously Ellisras) and Musina mingle amongst the usual suspects of Bryanston, Seapoint and Camps Bay in a recent list of most expensive rental towns in South Africa. According to the PayProp Rental Index for Q3 2014, protracted strike action in the mining sector has not shifted Lephalale off the top spot of SA’s most expensive towns with an average rental of R19,986 for a residential property.
As the largest processor of residential letting transactions in the country, PayProp has published the PayProp Rental Index since December 2011 tracking residential letting trends. CEO of PayProp, Louw Liebenberg says that the Q3 Index shows the weighted average national rental is currently R6,192 – 7.5% up from the same period last year.
Liebenberg says that growth continues to be driven by rising numbers of rentals in the R5,000 – R7,000 category combined with flat growth in the number of rentals in bands below this. “Over the past quarter we’ve also seen strong growth in the R7,500 –R10,000 band which indicates that this bracket will become more prominent in future indices.”
Cash-strapped tenants nationwide
The ratio of damage deposits relative to rentals continues to increase at a national level. Currently at 1.36 times the value of the average rental, damage deposits require tenants to pay out an average of R8,297.28 upfront. If added to the customary one month’s rental in advance, a tenant must have as much as R14,489.28 on hand to rent an average property in South Africa. “No matter how familiar you are with these sorts of figures, there’s no way to see them without hurting anew on behalf of the cash-strapped consumer,” says Liebenberg.
Aging tenants in the Western Cape
Liebenberg says that for the first time, the PayProp Rental Index is now able to give an age profile of South Africa’s tenants and landlords. “The additional data has shown, for example, that the average landlord in the Western Cape is almost a decade older than in Mpumalanga, where the average is a youthful 47 years of age.” Overall he says that tenants are almost a decade younger than the owners of the properties they are renting. The Western Cape boasts the oldest tenants among the provinces.
Gauteng most expensive in which to own property
In terms of net yields, Limpopo, Mpumalanga and the Northern Cape continue to provide owners with the highest net yields in the country. Part of this calculation concerns the cost of owning a property in a particular province, represented by the combined effect of rates and taxes, repairs and special levies. Liebenberg says that Gauteng tops the list as the most expensive area in which to own a property, followed by the Western Cape and Mpumalanga.
“Besides being one of the highest-grossing provinces for landlords, Limpopo is also one of the cheapest provinces in which to own property, explaining the high levels of returns generated in this area,” says Liebenberg.