As the property market continues to piece itself back together amid the ongoing pandemic, the rental market continues to feel the impact of the times more than any other sector in the real estate industry.
While property sales have slowly picked up, and first-time homeowners are enjoying the advantages of a buyer’s market, empty rental properties continue to fill the market. With one in five properties in the R25 000+ price range, and 16 % of properties under R4 500 all remaining empty in the fourth quarter of 2020, the rental market is taking a hit like never before (as indicated by TPN’s Vacancy Survey 2020).
The rental market grew exponentially over the past decade, showing an increase of 33%. According to December 2020’s Stats SA General Household Survey, the rental market is divided as seen below:
- 2 million households rent a house, flat, cluster, townhouse or semi-detached dwelling
- <1 million households rent backyard accommodation (e.g. cottages, staff quarters)
- 762 000 households rent traditional or informal dwellings (e.g. shacks)
But even though South Africa has more than 3.7 million households who rely on renting their homes, the impact of COVID-19 on the job market saw many individuals lose their income due to job loss, leaving them with no option but to move in with family or friends. The uncertainty caused in the job market also makes it difficult for landlords to find reliable tenants, as so many tenants’ incomes may become affected without any notice.
Due to the shortage of demand, and the rising rate of vacancy, the construction of new rental properties has also been affected. Developers in many of the provinces have been forced to put their plans on hold until the market strengthens once again. The negative growth caused by this is something that will be with the property market throughout 2021.
Fortunately, a turning point seems to be on the cards. In the Western Cape, Eastern Cape, and KwaZulu-Natal, rental activity has begun to recover since the fourth quarter of 2020. Sadly, rental activity in Sandton, one of the rental metros of South Africa, continues to slip away, and has left Sandton with the highest vacancy rate in the country: a whopping 22.4%.
Landlords and developers alike are waiting to see what will happen next. As the country continues to strengthen itself and adapt to the pandemic that still looms overhead, the safety of tenants’ incomes will once again be able to help secure the rental market and ensure its growth in the years to come.
Now, more than ever, it is vital that you get the best advice in your real estate endeavours.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)