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KwaZulu-Natal tenants enjoy lowest rental escalations

Durban CBD resize

The rental market in KwaZulu-Natal has declined over the past 12 months with only about 60% of tenants current paying their rent on time and in full, says Tobie Fourie, national rentals manager for Chas Everitt International. The average rental amount per month in KZN is slightly down on last year at just over R6,500 per month.

The somewhat depressing view of the rental market in the province is reinforced by input from Paul Stevens, CEO of data-driven franchise group, Just Property, who points out that figures provided by TPN show that rental escalations in KZN are the lowest nationally at 2.74% currently, while vacancy rates are the second-lowest at 7.2%.

Profiling the Durban housing marketDurban resize

Durban, the province’s most industrialised hub, boasts a real estate market of some 199,400 homes of various types, of which rental homes account for about 43% (86,300 homes), says Fourie. Rounded up, Durban’s rental properties include 2,220 clusters, 40,250 flats, 3,600 flatlets or rooms, 29,200 freehold homes, 9,130 informal properties, 1,120 townhouses and 820 unspecified.

The tenant population distribution consists of 62% black African, 7% coloured, 17% Indian or Asian, 12% white and 1,44% defined as “other”.

The number of people who live in each dwelling in the Durban area, indicators that help landlords and rental agents to identify their biggest markets and how to place their tenants, are calculated according to (rounded off) household sizes as follows:

  • 1 person – 40%
  • 2 people – 24%
  • 3 people – 15%
  • 4 people – 11%
  • 5 people – 5%
  • 6+ people – 4%

How well do Durban’s tenants pay their rent?shocked tenants resize

“The latest TPN rental payment index reveals what landlords and rental agents can expect in terms of tenants making full rental payment on time, paying late, making partial payment, and not paying at all,” Fourie remarks.

The figures for Durban vs KZN as a whole:

  Durban KZN
Did not pay (DNP) 8.10% 7.20%
Grace period (usually 7 days) (GP) 5.40% 5.20%
Paid Late (PL) 15% 13.30%
Paid on Time (POT) 56.70% 62.10%
Partial Payment only (PP) 14.80% 12.10%

Good standing (POT+GP+PL) for Durban rounded off is 77.1%. The Durban figure is below the KZN level of 80.6%, but the national level is still the highest at 84%.

Where do all the good tenants live?pot of gold

Stevens, providing insights into the KZN rental market, referencing data up to Q2 this year provided by TPN, says the best performing KZN suburbs in terms of average good standing ratio are Doonside in Kingsburgh (90.1%), The Wolds in Pinetown (88.8%) and New Germany in Pinetown (88.6%). South Beach is performing poorly at 63.2%.

“In terms of return (taking into account yield and capital growth), the best performing suburbs are Ballito at 7.9%, Kenville at 5.6% and Coversham Glen & Malvern at 4.3%. South Beach is again the poorest performer at -1.6%.

Millennials dominate the national rental marketCouple taking selfie with dog

“Generally speaking, this has been the longest depressed market we have known and there are no indicators that it is going to turn in the short-term,” says Stevens. “Tough is our new normal.”

He states that according to data recorded by TPN since 2008, millennials make up the largest distribution of tenants in South Africa. As they age, so does the average age of the tenant, which currently stands at 32 years old. The data shows that Gen Z is not opening any rental doors; they only make up about 6% of the rental market. The average lease length has been steadily increasing since 2012 and is currently at 18.3 months (about 1 year and 5 months).

Multi-gen renting a realityGirl playing with doll house.resize

A trend that has emerged nationwide, including in KZN, is the demand for multi-generational living in rental or owned property.

Lawrence Homan, owner of Just Property Durban Berea and Margate, remarks that: “Finding a suitable property at a low rental that will accommodate everyone can prove difficult. Therefore, either the younger siblings share a room or the grandparent share with a grandchild. Most of the time this rental arrangement is to save costs, so the preference seems to be a 3-bedroom freestanding house at a rental of between R5,500 and R10,000 per month.”

Tenants have choice, but not positive creditcredit-card-man-resize

Julie Pillay, long-term rentals manager for Chas Everitt Umhlanga with responsibility across

Durban North, Mount Edgecombe, Izinga, La Lucia, Sunningdale, Somerset Park and Umdloti, has seen more properties “coming onto the market in the past 18 to 24 months and the demand for these properties declining steadily”.

“We find too that the budget of the client who is looking to rent has fallen by at least 20% and client credit ratings have also declined as people have become more indebted,” she says. “The most noticeable decline in demand has been in the Umhlanga Ridge and Sibaya areas where a large number of new developments have taken place. There is consequently an oversupply that has been particularly noticeable since February. In these areas, previously popular buildings are losing out even when they offer slightly lower rentals because the high level of competition means that tenants now expect to get more for the same rent.

“We do expect the market to correct, but this is being delayed by the current political and economic climate. At the moment the major trends among tenants are to remain where they are, downscale, move to a more affordable area or share with family – none of which are positive for rental growth.”

Leanne Pillay, rentals manager for Chas Everitt International in Ballito, says more people are looking for lower-end rentals as opposed to two years ago. Ballito as a retail hub remains popular for families.

“People at the lower end of the market are finding it difficult to buy as basic starter units are marketed at high prices,” says Pillay. “They are therefore compelled to rent and with rapid urbanisation and population growth, the demand for rental property will continue to grow as the oversupply shrinks.”

Landlords not smiling to the banklandlord-and-tenant

She says there is an overstock of properties in the higher rental bracket at R20,000 and above. Landlords who own smaller units have very high rental expectations in a market where there is a paucity of such stock. A standard 2-bedroom, 1-bathroom unit that attracted a rent of between R6,000 and R6,500 per month about two to three years ago is now being offered at between R8,000  and R8,500 per month.

Lee-Anne Naik, long-term rentals manager for Chas Everitt Morningside, identifies a change in the market in that many people are now looking at renting property rather than purchasing due to the challenges of affordability and bond approvals. However, the rental market is also experiencing difficulties as a result of many potential tenants being turned away due to bad credit ratings.

“There seems to be a trend to rent, especially in the Morningside area, due to factors such as affordability, locality, security and the convenience offered in terms of amenities,” says Naik. “Morningside is also the closest residential suburb to the Moses Mabhida Stadium which creates additional demand for the area since the stadium has created many employment opportunities.

“Morningside boasts many classical examples of Edwardian- and Victorian-style homes, these being rented out at reasonable amounts compared to other suburbs. The area is growing continually and new units coming onto the market are being rented out at affordable prices. Currently there is no oversupply of stock but the market seems set to receive an increase in the supply of stock towards the beginning of next year when many existing tenants will be relocating elsewhere for work reasons.”

She says the rental market expands rapidly towards the beginning of the year, especially during January and February as many people tend to relocate during this time as they look to start off the year with new employment.

“Many inquiries are being received from individuals or families within the 25 to 50 year age range,” says Naik. “Tenants with an income of between R15,000 and R25,000 are mostly likely to rent, but enquiries are being received from clients with a monthly income of up to R40,000 that choose to rent in the area. These clients are usually professionals such as doctors, nurses, teachers and engineers.”

Words: Blake Wilkins


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