South Africa's residential rents are continuing their rapid rise with the Trafalgar national rent index rising by an annualised 12.5 percent to 153 in the first half of 2008, the property management company said on Wednesday.

Significantly, the rise is 100 percent up on January to June 2007's 6.2 percent annualised rental increase, Trafalgar said.

"A pattern seems to be emerging of rents rising faster in the second half of the year," Andrew Schaefer, MD of Trafalgar said.

"It looks like tenants face substantial double digit annualised increases for the rest of this year."

Double digit increases have already hit tenants in East London (with an annualised 18 percent rise), Port Elizabeth (12 percent), Pretoria (11.5 percent) and greater Durban (10.5 percent).

"Johannesburg rents rose an annualised 18 percent from June to December last year and so the trend even in Johannesburg is definitely up too."

According to Trafalgar, Pretoria had a big turnaround from - 3 percent to 11.5 percent.

Cape Town nearly quadrupled its increase, from four percent to 14 percent.

Schaefer said that national rents were rising faster than the price of sectional title units, the biggest rental sector, after nearly a decade of lagging price increases.

"The Lightstone average price for a sectional title property to date in 2008 is R669 000 with a current bond and levy ownership cost of about R140 000/year — a price to holding ratio of six," he said.

"The average rent for a two bed flat is about R60 000/year almost half the cost of owning. This makes the price to rent ratio 11."

Working on long term interest rate trends, it was Schaefer's estimate that the ratio should be between seven and eight.

"So rents still have a long way to go," he said.

10/07/2008

iafrica