Lettings Sector - SA Property Rentals and Stock Shortages

Estate agents surveyed by the Tenant Profile Network, (TPN) recently revealed that the residential property market faces good quality rental stock shortages with 94 percent of respondents indicating a shortage of rental properties. The report further reveals that 38 percent of tenants are renting property for the first time, 35 percent were downscaling while 27 percent moved to upscale.

Michelle Dickens, TPN Managing Director explains that according to Census 2011, 3.5 million households or 25 percent of the population live in rented accommodation – an increase from 18 percent in the previous (2001) census.

“Tenants are also staying in rented accommodation for longer, as previously tenants’ age spiked at 27 years, after which they began exiting the rental market,” notes Dickens. She says currently, the spike has moved to age 31, indicating that tenants are finding the home ownership market more difficult to enter – and points to an ever increasing number of tenants having to find accommodation in a stagnant property stock pool.

A Property24 reader asks:
Can I subdivide and what will it cost?

I own a block of flats in the Alberton North area of Johannesburg. The building consists of eight flats and a house which is adjacent to the flats that are rented as a business premises. I would like to sell the property and have considered the possibility of either:

a) Subdividing the flats and selling them off individually or,
b) Subdividing the house from the block of flats and selling them off separately.

I have been told that it would yield a better return this way,however, I am concerned about the costs and time frame as I don’t have the extra money as capital. Can you give me some guidance and costs etc. and what would be the best way to do this?

Andrew CB Smith, a Director of DenoonSampson Ndlovu Inc. Conveyancing Attorney, advises: The first consideration you will need to give some thought to is the marketability of the different options.

Advice for DIY landlords

Usually micro-landlords (those with one to ten properties) tend to manage their properties and their tenants themselves. Michael Bauer, General Manager of IHFM, says in these cases there are aspects of property management, rental collection or tenant selection that landlords might need guidance on. Bauer says if the property is not maintained properly or the occupancy of the unit not kept at a steady rate, the investment profitability or viability is lessened.

If tenants are good payers, they must be looked after in order to keep them in place and not risk losing the steady income from that tenant. It is often the case that tenants will leave the premises at the end of their leases (some will even cancel their lease) if they are unhappy with the way the property is being managed and will not be convinced to stay with promises of change or improvements.

The longer the landlord can keep one good tenant in the unit, the better his return. “You have to take into account the costs of advertising for a new tenant, maintaining the property while it is standing empty or keeping an eye on it security-wise and the loss of income during the time the unit is vacant,” he says. The time it takes to advertise and vet prospective tenants needs to be taken into account. If you are doing it yourself, i.e. if your time is worth R400 an hour for example, and it takes you an hour to meet with a new tenant, it is a loss from your personal income.

Commercial property investment course

The Institute of Estate Agents is hosting a course facilitated by Johan Meyer, a Seeff Properties franchisee with 20 years’ experience in property, which is aimed at estate agents wanting to brush up on their knowledge of commercial property and investing in commercial property. This course, which takes place from 19 to 21 June 2013, will run from 9am to 4pm at the IEASA Training Centre in Pinelands. Meyer has run various courses on both residential and commercial property, and is a lecturer and trainer for the Institute as well as Varsity College. He has experience in bank investment, loans, property sales and rentals, valuations and is the author of the book ‘Take the gamble out of real estate’.

Property construction statistics

According to data from Stats SA, there is positive improvement in building completions, with the continuation of smaller houses being built. Statistics South Africa (Stats SA) data shows that the total value of Total value of recorded building plans passed at (current prices) increased by 33.4 percent (R4 920 8 million) during the first quarter of 2013 and the biggest increase was reported for non-residential buildings (107.9 percent or R3 137 1 million), followed by residential buildings (22.2 percent or R1 529 2 million) and additions and alterations (5.2 percent or R254.6 million). Six provinces reported year-on-year (y/y) increases in the value of building plans passed in Q1 2013 with Gauteng dominating, recording a total contribution of 23.9 percentage points or R3 512 8 million.

A Property24 reader asks:

How can I become an estate agent?

I really have the desire and passion to become a real estate agent. I have a general diploma in management. How do I start and what are the requirements? Should I do it full- or part-time?

Jaco Rademeyer, from Jaco Rademeyer Estates, responds: As a point of departure, it is very important for an individual to understand the definition of an estate agent. In terms of the Estate Agency Affairs Act 112 of 1976, an estate agent is any person who holds himself out as a person who, or advertises that he, buys and sells or lets and hires immovable property, an interest in immovable property or a business undertaking on behalf of or on instructions of someone else for gain.

If an individual wants to become an estate agent, the first thing he or she should do is to find an internship with a compliant real estate company. The said company must hold a valid Fidelity Fund Certificate from the Estate Agency Affairs Board. The individual must serve as an interim agent under the supervision of a principal estate agent who has continuously held a valid Fidelity Fund Certificate for a period of not less than three years. In simple terms, a Fidelity Fund Certificate is a licence to trade.

What every tenant should know?

Renting a property can be a daunting experience for new tenants. In the excitement of finding that perfect home, important details can be overlooked which often come back to haunt tenants when the lease ends or the relationship with the agent sours. Potential tenants should be equipped with as much information as possible when entering into a rental agreement, says Louw Liebenberg, CEO of PayProp, SA’s largest residential letting transactions processor.

“Like any contract the agreement is binding, and in many instances a property rental is the tenant’s largest monthly financial transaction and hence should be managed carefully.” Liebenberg says there are certain things every new tenant should know before signing on the dotted line - Is your agent a certified Estate Agent?

In South Africa, the law requires that every estate agent be issued with a Fidelity Fund Certificate (FFC) in order to be able to trade. This certificate is only valid for a year at a time and provides assurance to the consumer that he is able to claim damages from the Fidelity Fund (administered by the Estate Agency Affairs Board) should he suffer financial losses due to negligence or fraud by the agent.

Courtesy: The Agent - Official Publication of the Estate Agency Affairs Board

Acknowledgements to:

Michelle Dickens, TPN Managing Director
Andrew CB Smith, a Director of DenoonSampson Ndlovu Inc.
Michael Bauer, General Manager of IHFM
Johan Meyer, a Seeff Properties
Statistics South Africa (Stats SA)
Jaco Rademeyer, from Jaco Rademeyer Estates
Louw Liebenberg, CEO of PayProp

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