Cape Town rental market surging ahead of other metros
Category Rentals
On the whole, the Cape Town rental market surged ahead of other metros over the last year, achieving some of the lowest vacancy rates and good rental income growth for landlords.
Data from the TPN and PayProp rental barometers indicate that the rental market is in a strong position, and set to deliver good rental growth for landlords this year, provided there are no economic shocks.
One of the first trends observed from the rental data for last year, is that rental income growth for landlords strengthened to the best levels since 2017. Overall average rental growth measured at around 4.5%-5% while inflation dropped to around 3% by the end of the year, thus topping inflation for the first time in recent years.
The Western Cape enjoyed the best annual growth and achieved average growth of 9.3%, taking the average rent for the province to R10,875 per month. This was notably higher compared to other provinces including Gauteng which grew by only 3.1%.
Rental yields for Cape Town averaged around 4%-6% according to information from africaninvestor.com. These yields obviously vary, depending on the property with those held for a longer period tending to deliver higher yields compared to newer investments.
Another key trend highlighted by TPN was that tenant arrears fell to a record low. This was due to salary hikes, and the lowering of the interest rate which reduced debt repayments, and thus increased the amount of disposable income available for rent payments.
Further good news for landlords is that vacancy rates in the Cape were the lowest in the country for the last year, but this is obviously subject to seasonal fluctuation. According to the Rode Report, the vacancy rate for Cape Town was around 2.5%.
We have seen a higher demand for rental accommodation over the last two years, in part due to the higher interest rate pushing more people to the rental market. It is also attributable to an influx of people, including those semigrating to the City, and the Southern Suburbs/Constantiaberg in particular.
From largely favouring tenants a few years ago, the rental market now largely favours landlords. The upside is that landlords are able to earn a secure income from their rental property investment, provided their property is in a good condition, the rental rate is competitive for the area, and the tenant managed, and the property well-maintained.
As experienced local market rental agents, Seeff offers comprehensive rentals solutions and services, backed by tech and admin support. Please feel free to contact me to discuss your needs or for guidance if you wish to invest in a rental property.
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Author: Gina Meintjes
