SA rental growth predictions for 2020
Category Property
"We've entered the new year with the continued threat of power cuts and an unstable economy that is unlikely to attract foreign investment in the short term," says PayProp's Johette Smuts.
Affordability is and will continue to be an important factor in South Africa with sub-inflation income growth increasing the pressure financially on consumers, and particularly in those provinces where rental growth outpaces inflation. Added to this, the oversupply of housing in some of the bigger provinces continues to suppress rental growth.
"Supply is relatively inelastic, and demand will be slow to change in the short term," says Smuts.
Smuts says that for most of 2017 and 2018, the South African rental growth rate trended downward. Rents still increased but the pace was much slower. However, in the last quarter of 2018, the country experienced its first uptick in quarterly rental growth (measured year-on-year) after six consecutive quarters of decline.
In 2019, we saw rental growth trend sideways at below 4%, trailing an already low inflation rate. The moving average line on the graph (which effectively smooths the growth rate, making the longer-term trend easier to see) confirms the sideways trend.
When tenants can move to more affordable housing, landlords find it difficult to demand high rent increases. Indeed, tenants squeezed by sub-inflation wage growth may opt to move to cheaper housing even without the threat of rent rises.
"Whilst we're hopeful that the second quarter will show some improvement, it's likely to remain unchanged. Added to that, with the immense financial pressure on South Africans, it's important for landlords, rental agents and property owners to place risk management at the top of their priority list for the foreseeable future," advises Smuts. "Don't compromise on new tenant checks, rechecking before renewal, and diligently chasing arrears."
Author: Property 24
