2009/01/23

Demand for flats to let in the Johannesburg CBD continues to outstrip supply, with rentals for one and two-bedroom units up by more than 20% last year.

Latest figures from property economists Rode & Associates show that the average rental for a one-bedroom flat in Jozi's inner city, including Joubert Park, Braamfontein, Hillbrow, Berea and Parktown, increased by a hefty 29% in third quarter 2008 (y-o-y).

That saw average inner city rentals for one-bedroom flats climb from R2,100 per month in third quarter 2007 to R2,700 per month a year later. Rentals for two-bedroom flats were up 22,5% over the same period - from an average R2,613/month to R3,200/month.

Richard Rubin, CEO of inner city developer Aengus Property, confirms that rentals in the Johannesburg CBD continue to rise at double-digit rates. He says inner city rentals are driven by healthy demand for affordable accommodation from an emerging middle class who wants to live within easy distance of some of Johannesburg's biggest employers.

That is in stark contrast to the situation in many of Johannesburg's northern suburbs where a growing oversupply of stock is placing a firm lid on rental growth. For instance, in Rosebank, Killarney and Illovo, flat owners are no longer recording any rental growth.

According to Rode & Associates, rentals for one and two-bedroom units in these suburbs have remained flat in the12 months to end-September 2008, at levels of around R4k per month and R5,500 per month respectively.

Rode & Associates economist John Lottering says clearly the suburban shift away from owning residential property to the more affordable option of renting, was not as potent as expected.

Other industry players confirm that rental demand and growth in Johannesburg's northern suburbs have not surged to the extent anticipated. In fact, buy-to-let investors in the northern suburbs of Johannesburg, unlike their inner city counterparts, are finding it increasingly difficult to pass the standard 10% per annum rental increases on to tenants when leases expire.

Leapfrog rental consultant Geretha Schickerling says in Sandton rentals are actually falling. She notes that a glut of newly built sectional title stock has been coming on to the market since mid-2008, creating an oversupply of rental accommodation. Tenants are also downscaling to cheaper accommodation, placing further pressure on rentals.

Schickerling says rental units are now available in central Sandton for as little as R5k per month. "A year ago one would have been lucky to find anything for less than R10k per month." - Joan Muller