For more than a year there have been ongoing reports that rentals of residential properties will rise faster than they have done for a decade or more.

According to Greeff Properties Rental Consultant Caren de Nobrega this has not happened. "It was thought that the lack of bond finance, higher interest rates and the increased cost of living would cut into the demand for owned homes and this would boost the rental market. However, the near-recessionary conditions have also made people tighten their belts and cut back on every aspect of expenditure — including rentals."

Landlords may have to forgo increase

Landlords, says de Nobrega, will have to accept annual rental rises of only eight to 10 percent at least until early 2010 and in some cases it may even be necessary to forgo an increase to hold onto a good tenant.

Right now, she says, the lower priced properties commanding rents well under R10 000 per month are performing rather better than the high rent properties. Rentals for homes and apartments in the upper bracket are now often overpriced and these premises are sometimes standing empty for months. In general, she says, any property renting at over R25 000 per month probably needs a R5000 downward adjustment in the rental.

A long term investment

Mike Greeff, Chief Executive of Greeff Properties, says that de Nobrega’s comments should not deter people from buying to rent. Returns, he believes, should be calculated over a four or five year span and investment property should never be short-term.

"The plain truth," he said, "is that at this time, when many JSE Securities Exchange stocks have lost over 50 percent of their value, the Cape Town Southern Suburbs property sector has by contrast been a star performer and this can be seen in the portfolios we handle. Very few of our landlords have had any real difficulty with rental payments and most units have continued to show satisfactory to good capital appreciation year-on-year. The upside is that as interest rates are likely to decrease as predicted in the year ahead, so the returns on bonded units will increase."