Cape Town tenants migrating to "more affordable" apartments in the Northern Suburbs

The Western Cape residential property market, although still performing well ahead of similar markets in other South African provinces, is undoubtedly getting tougher for both tenants and landlords, says Rowan Alexander, Director of Alexander Swart Property – and one result of this, says Janine Swart, who heads up the Alexander Swart rental division, is that there is now a steady migration in Cape Town to the more affordable apartments of the Northern suburbs. Here, she says, it is still possible to find large numbers of attractive, well sited rental apartments priced in the very popular R7000 – R9000 price range—and in this price bracket there is an ongoing demand.

Even in this price range, however, says Swart, her company (and others) are now advising landlords that if they want to hold on to good tenants, they will probably have to accept that the previous +/- 10% annual rental increases are sometimes no longer obtainable and annual increases for the next two or three years will probably do no more than keep up with inflation.

Alexander Swart’s rental division handles some 350 apartments in Brackenfell, Kraaifontein, Burgundy Estate and Durbanville, the last being a relatively new market but “one with great potential”. The majority of these (some 70% in all) are in the R4000 – R10 000 rental bracket and these, says Swart, continue to be much in demand with tenantless periods very seldom lasting more than two months. (In the higher price brackets, she says, it can be more difficult to find tenants.)

Alexander Swart’s July figures reveal that 92% of their tenants are in “good standing” with regard to payments, a figure that is over 10% higher than the national average. Six percent pay late or only partially but less than 1,5% default to the point where the agents have to take legal action and hand them over to lawyers. 

These figures, says Swart, show that although the Western Cape (and the Greater Cape Town) rental market, is beginning to feel the strain of the current economic conditions, middle bracket apartments here still offer sound buy-to-let investment prospects. This is especially true, she says, if the investor chooses an agency like Alexander Swart whose admin staff keep track monthly, via the national credit bureaux, of all the tenants’ credit lapses elsewhere.

“If we detect that the tenant is falling behind on other payments, we take steps to see that he or she cannot renew their leases when these expire. This is one of the reasons that we have such satisfactory tenant performances.”

Asked how well the buy-to- let rental market is holding up under the tight conditions, Alexander says that FNB’s figures show that countrywide the percentage of those buying purely for investment purposes (i.e. not to occupy themselves) has dropped from a high of 25% in 2004 to 8,25% today. Again, however, the Western Cape is performing slightly ahead of this average with approximately 10% to 12% of buyers (by Alexander Swart’s reckoning) being simply non-resident investors. In those schemes where the rental returns are above average, buy-to-let is even more popular.

“Fortunately,” says Alexander, “the many Cape Town buy-to-let investors have learned that political unrest and economic downturns, although a serious concern, are likely to affect the market only in cycles, not permanently. They take a longer term view and their optimism always surfaces after times of trial when conditions improve- and they tend to believe that in the long run conditions always DO improve.”