The residential market will boom once the full lock down is lifted in terms of activity, but rental rates will come under tremendous pressure according to the Seeff Property Group.
The market has been in a holding pattern for the last five-odd weeks as tenants who find themselves in financial difficulty are unable to move out while landlords who may now obtain eviction orders are still not able to execute these.
Samuel Seeff, chairman of the Seeff Property Group says that agents have been busy during the lock down and are gearing up for significant activity and a great deal of movement once the lock down is lifted.
Financial pressure will bear down on both tenants and landlords. The double-whammy of the lock down and Moody’s and S&P downgrades and resultant financial pressure on households will force many homeowners into the rental market.
At the same time, many current tenants will need to downgrade to cheaper rentals while landlords will look to execute evictions which will add further stock and movement to the market.
Stock levels will rise with many sellers putting their properties into the rental market until property prices improve. Airbnb and holiday rental properties are already flooding the rental market, adding further to the stock levels.
While there will be higher demand for properties, rental rates will come under further pressure as tenants simply cannot pay more. Throughout 2019, rental rates were already in decline due to the deteriorating economic climate.
Preliminary information from TPN indicates that almost 16% of tenants did not pay their full rent in April and a further 16% did not pay any rent at all, that is just over a third of the rental market already showing signs of distress and the longer the lock down lasts, the more this will deteriorate.
Landlords will therefore need to be flexible with their rental rates or they could face increased vacancy rates and risk financial losses. Airbnb and holiday property owners will need to consider storing their furniture as there is generally much lower demand for furnished accommodation.
Despite the financial challenges, tenants need to focus on keeping their credit records positive as they will still have to pass the vetting criteria should they need to move to cheaper accommodation for example. Alternatively, tenants should consider sharing accommodation until they get back on their feet.
Mid-market areas such as Blouberg will be active according to Nancy Oeschger, Seeff’ rentals manager for the area, but landlords will need to be flexible with their rental rates to attract good tenants. Tiaan Pretorius, an agent with Seeff Centurion believes that developer stock will add further to the stock levels in the market.
The proximity to the Atlantic Seaboard is likely to bode well for demand in the Hout Bay area, says Janine van Heerden, Seeff’s rentals manager for the area, who says that you can rent a family house with a garden and pool for the price of a small apartment elsewhere on the Atlantic Seaboard.
While luxury market areas such as the Cape where rental rates have escalated drastically over the last 5-10 years will see some pressure, Seeff’s top national rental agents for the past six consecutive years, Sonya Garisch and Jacqui Bush expect the Southern Suburbs and Constantiaberg market to bounce back quite quickly and that most luxury tenants will renew their leases rather than move. But they don’t rule out the possibility of an ‘after-shock’ in view of the extreme circumstances. For landlords, the adage of “if your property is priced correctly it will be let” will dominate.
Tourist hot spots such as the Atlantic Seaboard and Winelands will see higher stock levels because of Airbnb properties flooding the market. Kat Roth-Munnik, a rentals agent with Seeff Franschhoek says that these will need to be unfurnished and landlords will need to charge comparable rates if they want to fill it with residential tenants.