Good news for people struggling with renting and property rentals
Category Landlords / Investors
If you're a tenant struggling with renting or a landlord finding it hard to cope with your property's rental, know that there is good news and hope on the horizon.
The COVID-19 pandemic has changed the rental market drastically and made things even tougher for homeowners who are renting out their homes. But this won't be the case forever, says Dalene Kane, veteran rental agent for NS Property Solutions.
She explains that landlords still have much to gain from investing in a second property and that the situation for tenants is starting to look better already
What you need to know about the rental market
Whether you've been renting a home or are a homeowner leasing your property to a tenant, the last two years would have been tough on you. Many tenants have been struggling with high monthly rent way before the COVID-19 pandemic hit, while most landlords only felt the full effects of the changing market conditions during and after South Africa's hard lockdown in March.
"In the past, high interest rates made it difficult for people to buy homes, which meant that they were forced to rent," explains Dalene. "Because of the high demand for rental homes, landlords could increase rent yearly, leaving tenants in a tight spot."
But landlords are now facing the same predicament. Many households in South Africa felt the financial impact of the lockdown and weak economy in 2020, which, in turn, had an effect on landlords.
The TPN Vacancy Survey 2020 Q4 points out how workers were affected: "BankservAfrica Take-home Pay Index [confirmed] that 10.4% less workers were paid a salary in October 2020 compared with October 2019. Ultimately less people earning salaries means less households participating in the rental market." The credit bureau also highlights that 34% fewer workers were paid salaries in July 2020 when compared to July 2019.
This meant that landlords saw a drop in payment of rent. TPN's Rental Monitor Report for the Residential Sector 2020 Q4 notes that fewer than 75% of tenants were in good standing in the second quarter of 2020, compared to more than 80% in the first quarter of that year, before the lockdown hit.
The first quarter of 2021 shows a slight uptick in rentals, according to the PayProp Rental Index. But this rental growth rate is still lower than what it was in the first quarter of 2020, prior to the lockdown.
The low interest rate is making it even harder for landlords to find tenants now. Because home loans are now more affordable, many people who used to rent a home bought one instead. With fewer tenants available, and many not receiving their full salaries, there simply hasn't been enough demand for rental properties.
But this situation has its silver lining for tenants, and there is still much that landlords can look forward to, says Dalene.
Tenants: Good news if you're renting
"When the market took a nosedive, tenants were no longer willing to pay the high fees that some landlords asked," Dalene explains. She has found that many properties are now being let at slightly lower rates, making things easier for tenants.
Towards the end of 2020, the number of vacant properties was also up almost 13%, according to TPN. With more properties empty and available to rent, tenants now also have a wider variety to choose from.
If you're already renting, you might even receive a lower-than-usual escalation this year. Data shows a sharp decline in 2020 in the amount with which landlords have raised rent.
Some people who have been renting might also be tempted to buy a property instead now that home loans are more affordable. But Dalene cautions to be very careful about making this decision too quickly.
"If you're thinking of buying for the first time, it's important to think long-term about homeownership. Will you be able to afford your home loan in three or four years' time when the interest rate eventually starts picking up?"
If you're unsure whether you'll be able to pay your bond when rates increase, Dalene recommends taking full advantage of the current rental market, which offers more properties and lower monthly costs than before.
Explore NS Property Solutions' homes available for rent here: Properties for rent
Landlords: What to expect if you've invested in property rentals
There's no getting away from the shortage of tenants to rent properties like yours. But the right estate agent can help you make the most of your second home by ensuring you still generate rental income. "Work with your agent to play with your pricing strategy and find a price that's right for tenants," says Dalene.
But what landlords need most now is a mind shift. "If you can afford to keep your property, then you might have to bring down the price for now. Keep in mind that property is not always a cost-free investment, but it will always be one of the best investments you can make."
"Your home is a long-term investment. Even if the market recovers slowly, there will always be a demand for rental homes, especially when bonds become less affordable and more homeowners age, leading to a need for smaller, rental properties."
If you're a landlord that can afford to stick it out in this challenging market and lower the monthly rent on your property to attract or retain your tenants, it will pay off. While it may not happen overnight, it will happen - and you'll have a valuable asset in the form of a second home.
Interested in making the most of your rental property? Contact NS Property Solutions or reach out to Dalene for more information.
Author: NS Property Solutions