Joburg rental market not out of the woods yet

“There has certainly been a healthier appetite and good uptake for rental property, especially during the second quarter of 2018, but I can’t say that it’s due to a massively improved sentiment as landlords and tenants are still very concerned.

“If there has been positive sentiment, it has come from ex-pats renting high-end homes. Many are committing to long-term leases as they believe that there is a lot of money to be made in Africa.”

Competitive market

In 2017, the entry-to-middle market sectional title sector in Sandton took the hardest knock with a spike in vacancies and a sharp drop in yields, while “The Parks” area was generally the most resilient and the situation has not changed much this year, despite renewed activity in the sector.

“There are currently in excess of 2000 apartments available for rental in The Sandton CBD and once Embassy Towers, Acropolis and Masingita Towers are completed over the next few months, the market will be even more competitive.”

He adds that Embassy Towers may, however, find better traction in this market if the units are realistically priced as it’s without doubt the new benchmark in luxury apartment living.

“Despite uncertain economic times and rental yields that are generally plateauing, The Parks always seems to remain more resilient and, although even here landlords have felt the pinch to a degree as rentals have remained flat, at least they have not decreased. Given the lack of stock in these areas and the general inability to develop further, I don’t foresee the situation changing any time soon.”

While the rental market may not be booming, there are still solid returns to be made if investment buyers do their homework.

“Middle income areas near good schools remain ever popular and if I were to be drawn into where I would be investing my own money at the moment, I would look to Duxberry – an absolute gem of a suburb, secure, good value and close to the French school.”

He adds that a number of established rental agencies along with his own branch in Fourways have recorded record months this year.

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Commercial market under pressure

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, says that the commercial market is also still feeling considerable pressure this year, with an increase in office vacancy rates.

“By the end of Q1, vacancies had risen to 12.9% compared to 12.6% the previous quarter which is the highest vacancy rate since 2010.

“However, despite this fact, Johannesburg continues to be the first-choice location for many corporates due to continued developer interest in the city.”

Groves concludes that if landlords are negotiable on rentals and increases, price their properties competitively and offer a well-maintained product in a sought-after area, there is no reason why they would not yield good returns – both in the short and long term.