South Africa's residential rental market continues to strengthen as more people
desire – or are forced to – rent instead of buy property.
This could lead to a shortage of rental homes available and stronger rental
priceincreases,
says FNB’s John Loos in the latest Property Insight report.
Citing Consumer Price Index (CPI) data from Stats SA, he says residential rental
inflation has slowed from a multi-year high of 5.68% in September 2017 to 4.19%
as at June 2018. Flat rents remain the most affordable rental home category, but at
5.1% year-on-year inflation, it too is “off its recent inflation highs”. This “mediocre”
growth, however, has been good news in terms of containing overall CPI inflation
and helping keep interest rates “relatively low”.
“However, this rental market mediocrity has not been wonderful news for
landlords, but is perhaps understandable with hindsight,” Loos says.
“We did have rising interest rates from early-2014 to early-2016, and rate hiking
cycles do normally mean a stronger rental market as a portion ofaspirant
home
buyers postpone the buying decision. However, the reality was that this rate hiking
cycle
was tame, totalling a mere two percentage points’ worth of rate hiking in
total.”
In addition, a gradual broad economic growth stagnation since around 2012
has been gradually applying the pressure on the existing tenant population, limiting
landlord ability to increase rents, he says.
“As is to be expected, the lowest income groups are hardest hit by weak
economic conditions… ” In the current climate, Loos says it is expected more
people will be looking to rent in the near future. There will also be a more
constrained supply of rental stock.