As inflation and rising interest rates dim the attraction of residential property purchases, and slowly recovering employment statistics improve demand for formal residential rentals, it appears the worst may be over for South Africa’s rental market.
Having suffered weak demand leading to record vacancies and rock bottom escalation during Covid, rental investors will doubtless welcome this change of tide. According to Jacqui Savage, National Rentals Manager for the Rawson Property Group, the road ahead is not without a few bumps, however.
“It’s definitely heartening to see the rental market gaining momentum after a long period of stagnation,” she said. “Vacancy levels are recovering nicely, and demand looks set to grow. That said, rising costs are putting increasing pressure on landlords to escalate rentals, while consumer inflation is eating into tenant affordability at the same time.”
This, she warned, could see an increase in late rental payments and a decline in tenants in good standing – a trend that has already begun, according to the latest TPN Rental Monitor report.
The report shows a small but notable drop in tenants in good standing between Q4 2021 (81.4%) and Q1 2022 (80.78%). The under-R3,000 bracket had the worst decline, with deterioration extending into the R3,000 to R7,000 bracket.
For the first time in seven consecutive quarters, the R7,000 to R12,000 bracket saw no improvement in tenant payment behaviour. The R12,000 – R25,000 bracket, on the other hand, showed continued recovery reaching over 86%, while the R25-000+ bracket breached 80% for the first time in five years.
“There is also concern over the rising prevalence of rental scams,” said Savage. “More and more landlords are getting burned, and not just because of insufficient tenant vetting. Today’s criminals are smart and creative and can be extremely convincing. It’s really becoming essential to have a seasoned rental professional on your team, properly equipped to spot red flag behaviour and protect you and your investment from unscrupulous con artists.”
In terms of rental strategy, Savage said that stability should still be the ultimate priority for landlords in the coming months.
“There is going to be a very careful balance to strike between covering rising costs for landlords and potentially pricing their rental properties out of reach of their target market,” she said. “For now, a willingness to compromise and collaborate with good tenants to improve stability and retention is likely to pay far greater long-term dividends than maximising short-term profit margins.”
Sadly, more scammers are taking advantage of this opportunity to dupe unsuspecting applicants out of their hard-earned cash. David Jacobs, Gauteng regional manager for the Rawson Property Group, shares some of the more common rental scams and explains how best to protect yourself against them.
The scam: The Branded Faker
You arrive at a rental property and are handed an application on a pristine letterhead from a well-known and reputable agency. The place looks perfect, but you’re told that there’s a lot of interest so you need to be quick.
Convinced, you sign the lease and transfer your deposit without hesitation. When moving day arrives, however, your “agent” has mysteriously disappeared, leaving you with nowhere to stay and little hope of recovering your deposit.
The scam: Development Dodge
You arrive at a new development to view one of the newly completed units, but your agent has accidentally misplaced the keys. That’s okay – you can view the place through the windows, or even visit a similar but not-yet-finished unit to decide whether you want to apply for the lease.
You like what you can see, so you transfer your deposit and start packing your stuff for move-in day. When that day comes, you arrive at the apartment only to discover that it was never available, and your “agent” has absconded with your deposit and your first month’s rent.
The scam: The (un)Happy Holiday
You browse online media and find a beautiful holiday property for short-term rental. You get in touch with the listing agent and pay your deposit. When you arrive at your destination, kids in tow and sunscreen in hand, you discover eight or nine other families have also booked the same property, and the letting agent is nowhere to be found.
The scam: The Disappearing Deposit
You find a great rental property and sign a private lease directly with the landlord. You pay your deposit and move in – everything is hunky-dory. Unbeknownst to you, your landlord has taken your deposit and spent it. When you decide to move out, they don’t have the money to refund you.