Rental vacancy rates peak to +13%

Nationally, vacancy rates for residential property recorded 13.31% from 7.47% in Q1 2020, whereas the demand for rentals was 42.24% in Q1 2021.

Michelle Dickens

According to data from the TPN Credit Bureau, demand has remained under 50% in 2020 from nearly 70% in 2016.

Michelle Dickens, TPN managing director, says that rental escalations have been falling from just below 6% in 2016 to 0.2% by Q1 2021.

“During Q2 2021, landlords perceived vacancy rates to be high at 14.29% compared to 9.87% by estate agents,” says Dickens.

In addition, landlords believed that the supply of current rental stock in the market was high, sitting at just over 73%. Estate agents’ supply rating was 63.31% with demand at just over 55% (just over 51% for landlords).

By Q2 2021, the national vacancy rates per rental value was 13.15%. Tenants paying rent below R3 000 per month recorded the highest rate of 15.19%. Rental values of between R12 000 and R25 000 per month had the lowest rates of 11.93%.

The Eastern Cape province recorded the lowest, and single-digit vacancy rates of 4.28% compared to 14.38% in the Western Cape.

Dickens points out that in Gauteng, vacancy rates were high in Sandton, reaching 26.7%, whereas Centurion was 4.8%. “Sandton is an expensive location. Our tenant survey shows that when looking for rental property, they consider price, safety and distance to amenities including schools.”

Other areas in Gauteng that recorded single-digit vacancy rates are Ekurhuleni (9.1%) and Tshwane (9%).

Rental payments and yields

TPN further reveals that the bulk of tenants’ (35%) rental properties were priced between R4 500 and R7 000 per month, followed by R7 000 to R12 000 (23.3%).

According to data, over 84% and over 83% of tenants in the R7 000 to R12 000 and R12 000 to R25 000 ranges, respectively, were in rental good standing. Tenants paying rent below R3 000 per month recorded 65.73% during the second quarter of 2021.

Read also: North West records highest rental growth of 3.7%

 Good standing by rent value

Q121Paid on TimeGrace PeriodPaid LatePartial PaymentDid not PayGood StandingNational AverageMarket Share
<R3 00051.46%3.65%10.62%16.52%17.76%65.73%78.38%14.8%
R3 000–R7 00064.63%3.37%10.61%14.85%6.55%78.61%78.38%53.8%
R3 000–R4 50060.10%3.76%11.63%16.70%7.80%75.59%78.38%18.8%
R4 500–R7 00067.05%3.16%10.06%13.85%5.87%80.27%78.38%35.1%
R7 000–R12 00072.78%2.93%8.66%10.76%4.86%84.37%78.38%23.3%
R12 000–R25 00070.67%3.44%9.7%11.26%4.93%83.81%78.38%7.0%
Source: TPN

Source: TPN

Investing in sectional title units is much better now than buying full title properties when it comes to yields. Sectional title yields recorded 10.3%, whereas full title was 7.2% for Q2 2021.

Apartments in Johannesburg.
Image by: Denise Mhlanga

“Two-bedroom sectional title units are the best performers currently, and mostly driven by tenant co-sharing,” says Dickens.

Gauteng is the best performing province for sectional title properties at 11%. However, Dickens warns that to achieve these yields, landlords will have to collect rent first. During the first quarter of 2021, 76.7% of tenants were in good standing for rent and rental escalations.

Dickens adds that with vacancy rates continuing to increase, landlords need to do a thorough tenant credit check. “TPN data can help buy-to-let investors make informed decisions when buying, and for the general management of their rental properties.”

Edited by Gudrun Kaiser

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