|The property landscape for Investors in the buy to let space has sparked some shaken sentiment largely due to the current economic outlook. Market growth has left many Investors treading cautiously, especially coming out of 2018, which was not an encouraging year for the economy at large. Looking into 2019 the sentiment does not get any better with eyes squarely on upcoming land reform policies and how the election results settle in.
The rampant increase in the cost of living, fuel hikes and slow economic growth place huge strain on the man in the street and place further pressure on rental collections and bond payments. This cycle will see Landlords and tenants alike being stretched to meet their respective monthly commitments.
But this is a cycle and like all cycles the economy moves into a new trend. The market has moved back into the buyer’s space with Investors able to qualify for finance, or able to buy cash to take advantage of these conditions. Property sales for the last quarter have highlighted most of the buying activity in the R300 000.00 to R1 500 000.00 range with the trend continuing.
According to Lightstone’s Residential Property Indices (Oct 2018), the average house price increase across South Africa this past year has been 3.77%. The Western Cape has been the best performing with 9.9% house price inflation and the Northern Cape has shown the worst growth with only 1.1%. Much speculation supports this low rate to continue and encroaching on the Western Cape, this amidst the relief from water restrictions.
So, where does this place the buy to let Investor? Western Cape has been hard hit with higher than average vacancies and lower demand from qualifying consumers, however the average tenure rates for rentals has also increased from 18 to 35 months. Which augments the benefit of Landlords holding on to good non defaulting tenants. Statistics also show rentals that range below the R7000.00 mark occupy the biggest market space and where properties allow for multi -generational living opportunities enjoy lengthier tenure.
Delinquency rates for rentals are also on the rise and again indicative of an inactive potentially flat economy. This is only mitigated by solid property agent management skills which look to alleviate risk on all aspects of rental applications i.e correct unit pricing, tenant vetting, tenant behavioural analysis and payment histories. Managed upfront these disciplines go a long way to justifying Investor risk. It is for this reason that property agents need to be as transparent as possible and look to harness negotiating leverage with existing tenant – landlord relationships and exploiting all information data and behavioural technologies when penetrating the rental market.
The property landscape will change, its designed to do just that. How this is manipulated is what will drive your biggest reward in the upswing cycle.
At FinServe Property we place our Investors at the forefront of property trends. It is our honor to assist you with your Property Portfolio, to deal with all of the challenges, and to ensure that it is performing optimally for you. Click Here now and we will be in contact with you.