Lively upper-end rental market in South African coastal cities
Cape Town - There is a lively rental market at the upper-end of some coastal cities in South Africa, experts tell Fin24.
In prestigious, prime locations such as Bantry Bay, Clifton, Camps Bay, Fresnaye and the V&A Waterfront on the Western Cape’s Atlantic Seaboard and exclusive southern suburbs areas such as Bishopscourt and Constantia, long-term residential rentals of R70 000, R80 000, R90 000 and upwards per month remain fairly common according to Dexter Leite, rentals manager for Pam Golding Properties (PGP) in the Western Cape Metro Region.
“Demand for long term, luxury residential rentals at the upper levels remains. A recent case in point was two properties in Bishopscourt leased at R85 000 and R150 000 per month respectively, while three apartments in Bantry Bay attracted R86 000, R80 000 and R75 000 per month each," he said.
“We currently have properties listed at rentals of R95 000, R120 000 and R130 000 per month in Constantia and R120 000 per month in Bishopscourt – all situated in Cape Town’s prime southern suburbs locations."
The V&A Waterfront is another prime location for top-end luxury rental accommodation, says Leite.
It is sought after among local and upcountry tenants as well as those from abroad. Here rentals range from R30 000 to R40 000 per month for a two bedroom, and R40 000 to R60 000 per month for a three bedroom apartment.
Carol Reynolds, PGP area manager for Durban Coastal, says uMhlanga is a diverse area, hotting up with mixed use areas, commercial and retail hubs, traditional suburban pockets and a beachfront filled with apartment blocks and five star hotels.
Gateway comprises 96% sectional title, with the average selling price of an apartment in Gateway R900 000. Rental returns are good in her view.
A unit with two bedrooms that costs around R1m will lease for between R6 000 and R 7 000 per month. Forty-four percent of buyers in the area are between 18 and 35 years, indicating that this urban lifestyle suits young executives.
Neil de Beer, PGP area manager in the Ballito area, says buy-to-let investor at the Zimbali Coastal Resort look at long term capital growth in conjunction with gross rental yields of approximately 8% for both for holiday letting or long term letting there.
High season rates can peak to R5 000 per day for three bedrooms and up to R7 00 per day for four bedrooms. Entry level units of R4m can generate over R300 000 per year in gross earnings, with more expensive homes in the region of R500 000 to R600 000 per year. Long term rentals for entry level units start from R20 000 per month and can range up to R50 000 for larger homes.
Juan van Loggerenberg of Re/Max in Port Elizabeth, said the top residential property rental price at the moment for an unfurnished property is R48 000 per month.
Most rentals at the top end are, however, about R20 000 to -R25 000 per month for an unfurnished property, while furnished 2-bedroom apartments can get rentals of more than R15 000 per month.
"The highest rental income is mostly from modern, spotless homes, modern luxury furnished or unfurnished apartments and penthouses," said Van Loggerenberg.
The high rentals are mostly paid by foreigners and holiday makers, but many tenants in the top rental category are also local people not wanting bond commitments or not able to get home loan finance, he added.
"A lot of people who have sold property are unsure about re-investing in property in SA because of the political or economic factors. I find that the people who have sold expensive properties here have invested their money elsewhere and can afford the higher rentals, this gives them the flexibility to ‘move in a hurry’," said Van Loggerenberg.
As for the rental market in general, he said a so-called lock-up-and-go is the ultimate rental property.
"I find that these are in high demand, reaching rentals of between R8 000 and R10 000 per month furnished. If only we had more stock...," he added.
According to Jann Gill, Re/Max property consultant in Cape Town, said she has a few high-end rentals between R22 000 and R30 000 per month. She said these kinds of rentals can be obtained in Cape Town suburbs like Fresnaye, Blouberg, Sea Front and Claremont and are mostly paid by South Africans.
She said they pay these rentals because if they had a buy types of homes like that, the bond repayment would be in the range R40 000 to R45 000 per month.
"We are achieving much higher rentals than 18 months ago. People are now paying R9 000 for a 2-bedroom apartment in Milnerton where they were paying R7 500 a year back," she explained.
"Rentals in the City and along the Atlantic Seaboard have gone sky high. A year ago we were getting R8 000 for a 1-bedroom loft a year ago. The same loft in Green Point now gets R11 000 rental a month."
She said people rent because they could probably not afford a property like that as the bond repayment would be about R22 000 per month.
Vanessa Hau-Yoon, sales and rental agent for Re/Max in the Southern Cape, said in Wilderness, top monthly rentals are about R25 000 per month for beach front properties. Holiday rentals top at about R10 000 per day, but on average, holiday rentals are about R6 000 per day.
"Tenants in this price range are mostly foreigners. The majority of the foreigners that I deal with are Europeans and most of those are from Belgium, the Netherlands, Germany and Switzerland. The European tenants rent for two or three months, beginning from mid-January, each year," she explained.
South Africans, on the other hand, are willing to pay top rentals for about ten to fourteen days in December.
"Some of our tenants rent because they first want to see if they like the area, or because they have bought and are in the process of building or renovating," she explained.
Another trend she sees in the market currently is that long term rentals in Wilderness are not relative to the market related value of the house. A beach front house that sells for R10 000 000 will rent for about R25 000 per month.
Kim Mann of Re/Max in Cape Town's southern suburbs says she currently has a fully furnished penthouse in Rondebosch Village for R45 000 per month. She also has mountain side houses in Fish Hoek available at between R22 000 and R30 000 per month. She said these kinds of rentals are obtained in suburbs like Fish Hoek, Noordhoek and Rondeboch among South African tenants.
Executives on 3-year contracts or people moving down from Johannesburg and want to rent before they rush in and buy, usually pay these kinds of rentals. They are choosing the rental option as they do not need the permanency of their own property, but want a home at the same standard they are used to.
"Because of the large lack of choice, rental values are going up at a 'disastrous' rate. Landlords that are taking advantage of this situation are going to come to the point where their property is no longer a viable option, because they are unaffordable. That will result in landlords having to bring their prices in line with the market, which will then have a ripple effect through the market in general," cautions Mann.