Growth expected in 2017 for Gauteng rental sector

Jawitz Properties’ Eloisé De Stefanis, Gauteng regional manager, rentals and property management

“Activity is mostly in the lower price range of the market, across the board,” says Jawitz Properties’ Eloisé De Stefanis, Gauteng regional manager, rentals and property management. “At the higher end, the corporate relocations sector continues to secure leases but demand has slowed, with the possibility of an oversupply of stock in the future.”

New property development bracket

Demand has increased in the new property development bracket due to competitive pricing, adding pressure on existing overpriced renewable or re-lettable management stock. This is due to repeated rental escalations above market-related levels over the past two to three years of 8-10% per annum. Current rental escalations in Gauteng are linked to CPI and should be no more than 8%, but are more realistically hovering around 6.5-7.5%.

“As the demand for rentals increases, the market is likely to remain strong and sustainable. However, tenants are cautious and show resistance to higher lease fees and rentals. Landlords are pushing for reductions in procurement and renewal fees which may indicate more pressure due to the inflation rate vs lower increase in rentals achieved,” she says.

Sectional title schemes

Higher levies are anticipated next year due to the amendment of the Sectional Titles Act that makes provision for a compulsory minimum reserve fund for maintenance and repairs in all sectional title schemes. This will put pressure on landlords wanting to increase rental prices, which are unlikely to be achieved due to current market conditions. New development stock is priced competitively and allows, in some instances, for the first month rent-free plus other features such as appliances with modern finishes at a lower rental.

“In the third quarter there was demand for short-term leases and renewals of only a few months vs. the norm of one year which indicated low consumer confidence. Finally, in the past month lease terms are slowly increasing again to the norm of 12 months. Fewer requests for shorter term leases during the last quarter of 2016 would indicate a growth in consumer confidence. As demand increases we can anticipate a positive, yet cautious, 2017 forecast with stable continuous growth in the rentals market,” says De Stefanis.