Pretoria residential landlords are accepting low to no rent increases in order to keep good tenants, according to Seeff Property Group.
Seeff says affordable rentals of between R7,500 and R15,000, and up to R25,000 per month are in high demand.
“The area remains a top choice for tenants for a variety of reasons, including the high prevalence of security complexes and estates, schools and amenities,” says PG van der Linde, rentals manager for Seeff Pretoria East.
According to PayProp Rental Index Q2 2021, Gauteng, the most expensive province after the Western Cape to be a tenant, experienced a drop in rent for the second consecutive quarter.
Tenants paid on average 0.6% less per month, or R8,292 in Q2 2021 from R8,344 in Q2 2020 (a drop of R48).
Van der Linde explains that tenants favour properties that offer value for money. He advises landlords to get accurate rental valuations to current market conditions, to avoid the risk of vacancy and potential financial losses.
Additionally, he says that competitive pricing remains important in order to counter the low interest rates and oversupply of rental properties. “In Pretoria, rental escalation rates have been zero to negative to mitigate vacant properties by retaining good paying tenants.”
According to TPN Rental Monitor Q2 2021, the sweet-spot segment with monthly rentals of between R7,000 and R12,000, performed well with 86.32% of tenants in good standing and nearly three out of four tenants paying on time.
However, escalation remains at −1.03% for the second quarter of 2021 in this price bracket.
Pretoria rental yields
“Landlords have had to adjust to the price sensitivity in the market,” says Tiaan Pretorius, manager for Seeff Centurion. “In some cases, most existing rentals did not increase, and where there is one [a rental increase], this is generally kept below the Consumer Price Index (CPI).”
“Rental yields in Pretoria have stayed the same, offering fair value for existing landlords. For new buy-to-rent investors there are still opportunities in the market, which offer potential for future returns on their investment.”
Data from PayProp shows that rental growth reached 0.4% in the second quarter. Nationally, over a 12-month period, the average rent increased by R32 to R7,778 in Q2 2021 from R7,746 in Q2 2020.
“Rental growth remains under pressure due to lower interest rates enabling renters to purchase properties. This has resulted in the decreasing pool of available tenants and putting downward pressure on rent growth,” says Johette Smuts, Head of Data Analytics at PayProp.
Furthermore, she says that continued building and development in many cities has contributed to an ongoing oversupply of rental properties, thus adding downward pressure on rental growth.
Pretorius says that in Centurion, sectional title units in well-managed complexes and freestanding homes in secure estates are sought after. Two- and three-bedroom units priced between R7,500 and R10,000 per month are in demand.
Security estates are currently attracting tenants predominantly in the R15 000 to R20 000 range and luxury homes in the R20 000 to R25 000 range.
“New developments, especially in the lower price range of the rental market, are going to dictate what will be the new market-related rentals that landlords can charge,” Pretorius adds.
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Edited by Gudrun Kaiser
