Higher rentals offer greater value growth

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“In Gauteng, for example, there are quite a number of areas where the annual rental increase has been 8% to 10% over the past few years - in contrast to the national average of 5% to 6% - thanks to a perennial excess of tenant demand over supply.

“Such areas include those close to the Gautrain stations and to major transport routes, as well as others close to a cluster of good schools or a major employment node, and some that are sought-after because they have good security and low crime rates.”

Home values on the rise

And in every instance, he says, home values in these areas have also been rising at a faster-than-average rate.

“In Rosebank, where there is currently huge demand for upmarket apartments that are within walking distance of the local Gautrain station and the commercial centre, the average price of sectional title properties has risen by a whopping 39,6% in the past year.

“In Sandown, where there is equally strong demand but a greater supply of apartments and townhouses to rent close to the Sandton CBD, the average property price has risen by some 18% in the past year. And even in Morningside, which is further away from the CBD and the Gautrain station, prices have risen this past year by around 7,5%, which is still above average.”

What is more, Jacobs notes, investors in high-priced properties are not the only ones enjoying this double benefit. “In Braamfontein, for example, where rental demand is constantly underpinned by both students and young working people who want to live close to the Park Station public transport nexus, the average apartment price has risen by 21% over the past year.

“Similarly, in Hatfield and Arcadia, which are Pretoria’s high-demand student areas close to the Gautrain station, sectional title property prices have shown strong increases of 14% and 16% respectively in the past year.

“And in Grand Central, the suburb where the Midrand Gautrain station is located, the average apartment price has risen 17%, and in Die Hoewes, where the Centurion station is located, there has been a 14% increase since last year.”

Also in Tshwane, he says, buy-to-let investors are getting above-average rental returns in Annlin, an established suburb that is close to the new Wonderboom Junction commercial and transport development, and property prices have risen by some 15% in the past year. “And in Garsfontein, the suburb closest to all the new commercial developments in Menlyn Maine, there has been a significant increase in rental demand over the past 12 months, and an 11,5% increase in the average property price.”

Demand likely to increase

As for suburbs that are especially sought-after by tenants because they fall into the “feeder areas” of highly-rated schools, Jacobs says that Parkhurst, Bedfordview, Kyalami and Menlo Park are all good examples of suburbs where both rentals and property prices consistently top the averages.

“Meanwhile, it is worth noting that the demand for rental property is likely to increase across the board over the next two years as a result of increased interest rates that limit the ability of many people to afford their own homes or to qualify for homeloans.

“It is thus going to be a good time for landlords, provided they choose units in high demand areas and ensure that these are well-managed by professionals and properly maintained to protect their value growth.”