A quick review of articles online, reporting on Cape Town rental prices, turned up a range of headlines.
Cape town rental prices skyrocket – Feb 2017
Rental markets are under pressure – Feb 2018
Cape Town rental market to remain in the Doldrums – March 2018
Southern suburbs rentals cheaper – May 2018
In December 2017 segments of the rental market started showing signs of strain. By May / June this has become a prevalent feature in practically all markets we operate in – Only rentals below R8,000 are still holding up. We manage properties for clients from the City Bowl through to Plumstead and all markets are under sever strain.
Owners at the upper end of the market have in some cases accepted lower rentals this year than they were earning 2 years ago. The lower end of the market between R6k – 8k has been more resilient with landlords achieving increases of 5% on average.
The cause of the slow down is not down to one factor. Different market segments (Apartments / Houses, City Bowl / Suburb, Premium / Standard ) are affected by a combination of factors.
- Drought,
- Tenant fatigue (arising from the strong run on CT rentals in the past few year),
- New stock coming to the market,
- Air B&B investors reverting to the long-term rental market following a poor year and
- General economic and political uncertainty that has reduced enthusiasm.
The general consensus is that conditions will not change in the short term. Once the drought and politics / economics begin to move in the right direction we can expect property market to begin to shift.
We expect that the next 12 months will be a period of consolidation and reset in the market. This could take longer if there is not clear direction from the economy – we should look for GDP growth to improve considerably (2.5% to 3%) and to stabilise at that higher level before expecting a significant change.
In the meantime owners should be working to;
- Keep their rental properties in good condition so that they are in ready for marketing when they need to find a tenant
- Do everything possible to keep good tenants (tenants that pay well and look after the property nicely).
- Price your property competitively when marketing or re-negotiating .
- Ensure that your tenant vetting process is robust – the cost of taking on a bad tenant exceeds the benefit.
- Ensure that current tenants are carefully managed.
Contact us for a free consultation if you are selling, renting or investing.