SA Property Letting - 15 Rental Facts You Need to Know

A house is a house is a house…..

1. House prices may have increased significantly over time, but at the same time they've become much smaller. The average plot size has shrunk from 1 061m² in the late 1970s to just 574m² currently, with the average house shrinking from 203m² to 146m².

2. As the country's demographics continue to morph, so do housing formats. While 4- and 5-bedroom houses made up more than a third of all houses in the late 1980s, the figure is barely 10% today. Around 90% of all housing is comprised of 2 and 3 bedroom units.

Buying and selling

3. It takes longer than ever before to sell a house. In 2005 it took about 6 weeks; today the average time a house spends on the market is 15.6 weeks.

4. When a sale does happen, it is a negotiation. The latest figures show that 88% of sellers drop their asking price, and that the average fall in price is 11%.

5. People are scaling down due to economic pressures, and increasingly favour renting over owning. Home ownership has dropped from 70% a decade ago to just 62% now. 22% of sellers say their reason for selling is "downscaling due to financial pressure".

Investment purchasing

6. The buy-to-let market has slowed down significantly from the boom years in 2004, when 25% of buyers fell into this category. Today, only 9% are buy-to-let buyers, although this number is again picking up slightly.

7. There are an estimated 700 000 rental properties in South Africa – 65 000 of which are listed on the PayProp database.

8. Before ancillary costs, the average buy-to-let investor achieves a 7.6% return on capital. When costs such as property taxes, repairs and maintenance are factored in, this number drops to 6.3%.


9. According to the PayProp Rental Index, the average rental increase at present is just 5% - the lowest it's been in 12 months.

10. The latest TPN figures show that 11% of tenants do not pay their rent at all!

11. Across the price bands, the biggest risk for non-payment is encountered in the sub-R3 000 and above-R12 000 rental brackets. Below R3 000, tenants are hampered by inflationary pressures, while interest rates appear to thwart the more indebted tenants of the above-R12 000 category.

12. For the first quarter of 2012, TPN results showed 81% of tenants to be in good standing. This is a vast improvement on the 71% recorded in the first quarter of 2009.

Legal compliance

13. 73% of estate agencies most recently audited by the EAAB did not have a clean bill of health concerning their trust account audits – putting their clients (and themselves) at immense risk.

14. A shocking 32% of agents audited by the EAAB did not have valid Fidelity Fund Certificates.

15. The average rental portfolio generates 400 transactions and 700 accounting entries over month-end – requiring solid oversight.

To sum it all up, the market is showing slow signs of recovery on the sales side, while rentals seem to be growing in significance. However, tenants are under strain due to auxiliary cost increases, putting pressure on their ability to afford higher increases, thereby decreasing owner returns.

If you have a solid rental portfolio, now is the time to ensure that it is properly maintained, because it represents a reliable source of income in an unsure market.

Courtesy: PayProp

For further information contact:
Louw Liebenberg, Pay Prop CEO
Email: [email protected]

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