National rental vacancies are at an all-time low in the first quarter of 2024, with demand for rental property considerably outstripping supply in South Africa – great news for landlords heading into the second half of the year.
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According to TPN’s Vacancy Survey Report for the first quarter of 2024, the number of households renting is rising while home ownership is declining.
The survey measures the number of unoccupied full-title and sectional-title residential units, providing a comprehensive picture of the industry.
According to Stats SA’s most recent General Household Survey, 62.9% of families owned or were paying off a property in 2023, up from 64.4% in 2022.
During the same time period, the share of households in the rental market rose from 22.5% in 2022 to 23.9% in 2023.
Between 2022 and 2023, the share of households occupying rent-free properties stayed unchanged at 13.2%.
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The credit bureau stated that this is due to high interest rates mixed with low employment, salaries and general political and economic uncertainty, which has resulted in a decrease in the number of households living in properties that they own or are in the process of paying off.
As a result, in the first quarter of 2024, the national residential vacancy rate fell to its lowest level since TPN began its poll in 2016.
Nationally, 4.42% of rental homes were unoccupied in the first quarter of 2024, compared to 6.69% the previous quarter.
The current rental market is 9.66 points over equilibrium because demand exceeds supply.
In the first quarter of 2024, the overall supply rating was 57.54, while the demand rating was 76.85. These figures suggest a positive sentiment in the home rental sector.
This hopeful prognosis is understandable given the rental market’s low vacancies and positive rental growth.
The highest rental value category, R12 000 to R25 000 per month, has the highest index of 61.56 points, which is also good news for prospective landlords.
Furthermore, the mid-level rental value bands recovered from their decline in the previous quarter.
Several factors influence rental property investors’ supply-and-demand decisions.
They frequently have to fight for financing against other investment opportunities that may yield higher returns than real estate.
When interest rates are high, borrowing to fund new ventures becomes more expensive, reducing net profits.
Currently, low vacancy rates provide investors with improved security and lessen the risk of units remaining vacant.
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However, location and rental pricing should still be considered, and landlords should be aware that constricted household finances might lead to an increase in the number of renters defaulting on their rent.
According to TPN, the Western Cape and Gauteng are the greatest markets for landlords and potential investors.
Due to high interest rates in the second quarter of 2024, the preference for renting over home ownership is projected to persist.
The property market expected interest rates to begin falling in the second half of the year.
However, this is becoming less plausible as the local economy continues to be impacted by both domestic and foreign instability.
In May 2024, the South African Reserve Bank (SARB) declared that the repo rate will remain at 8.25%, allowing local commercial banks to maintain their prime lending rate of 11.75%.
The chronically high interest rates, which have been unchanged for six straight quarters, continue to burden consumers with debt.
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