CAPE TOWN'S NORTHERN SUBURBS RENTAL MARKET CONTENDING WITH MORE DIFFICULT CONDITIONS

The current challenges with which estate agents in Cape Town have to contend when selling homes, are reflected vividly in the rental market, says Janine Swart, CEO of the rental division at Alexander Swart Property. This market is now having to face up to more difficult times than it has experienced for several years.

"In general," says Swart, "the very popular R7000 to R9000 per month rental bracket, where the bulk of Alexander Swart's rental stock is located, is now taking longer to rent a property. Previously, we had one or two tenants lined up to move into a vacant home, whether sectional title or freestanding, but now the landlord may have to wait one, two or even three months to get a satisfactory tenant. What is more, he may have to accept either no rental increase, or an escalated rent of only 2 or 3% . The same low increases are now being experienced when rents come up for renewal."

Swart says this has come about because of the poor economy, job losses, wage cuts and an oversupply in the R7000 to R9000 sectional title rental bracket. The situation has led to an awareness by tenants to budget better and are now able to negotiate rents which in the past were fixed and offered on a take-it-or-leave-it basis. Landlords should not try to buck the trend but rather go with it until the situation improves. They should hold onto reliable tenants, taking the advice of their agents on this matter. In the current circumstances some landlords have tried their hand at managing without an agent but have all too often made the mistakes that an experienced agent would have avoided.

In the sub R7000 bracket the previous conditions still prevail: there is seldom any delay in finding new tenants and significant annual rental increases can still be achieved. However, the more expensive properties e.g. those priced around R15000 or more per month, can stick on the market for months if their landlords do not accept 20 % rent discounts.

The risk of defaulting tenants in all price categories is now quite high even when the agents have carried out the credit checks, which at Alexander Swart always precede their becoming involved with tenants. With existing tenants, said Swart,  Alexander Swart now use a service which alerts them month by month to debt defaults incurred by their tenants elsewhere and this gives them a warning of what to expect. This is a major task because her team manages some 350 properties - the biggest one team portfolio in Cape Town's northern suburbs.

Asked whether she would still recommend building up a rental portfolio, Swart said that such investment bases have proved to be some of the best performers and steadiest income producers. As properties in the middle and lower price brackets are now selling at slight discounts this is a good time to buy and to continue to increase one's asset base but it is probably not a good time to buy into expensive rental properties. It has been encouraging to note that several South Africans who have secured jobs overseas, often in the Middle East or the UK, have bought - and continue to buy local rental properties which Alexander Swart manage in their absence; banking their rents locally and paying off their bonds. These investments will build up worthwhile nest eggs and income providers when they return. "In particular investors should look for properties in security estates or with above average security protection. At Alexander Swart we are wary of becoming involved with properties in poor condition and, if they are not in a position to renovate thoroughly, investors should also avoid these properties." 

 Alexander Swart now offer their agents a legal insurance service, provided by an independent organisation, Landlord Legal, which for a relatively small monthly sum covers the costs of evicting an unsatisfactory tenant. Insurance, covering shortfalls incurred by defaulting tenants, is also available but Alexander Swart's early warning systems are in place and they are usually quick onto potential non-performing tenants.

For further information email Rowan Alexander :  rowan@asproperty.co.za or contact him on 082 581 3116. Mrs Swart can be contacted by emailing janine@asproperty.co.za or by calling her on 082 873 2183.