Multi-gen living characterising Port Elizabeth’s rental market
The challenging economic times putting frowns on the faces of consumers is impacting the middle and lower tiers of the residential rental sector in Port Elizabeth, in sync with the trend in most major urban areas in South Africa.
The common complaint of a paucity of rental stock in the middle and lower market sectors is repeated in this Eastern Cape city while TPN reports that the average tenancy period has increased to 18 months and the average age of tenants has risen from 24 to 32 in just the past 10 years.
“There is definitely a slowdown in upmarket rentals,” says David Rodgerson, property investor and owner of several RE/MAX estate agencies in the Eastern Cape. “There’s more interest in the lower to middle priced rental sector and as it’s all about affordability; these property opportunities are taken.
“Properties in the western areas of Port Elizabeth – where most new developments are taking place – are more affordable and are drawing the most demand. The siting of the Bay West Mall has created new employment opportunities and has acted as a drawcard for tenants in suburbs such as Llewellyn Park and Kabega Park. Rentals at around the R4,700 to R5,200 mark, depending on the type of property, are proving attractive.”
Rodgerson says that tenants are also looking at more centralised suburbs such as Richmond Hills where the trend to renovate properties and offer affordable rentals is proving popular with tenants.
“By way of contrast, it is more difficult to secure tenants for larger properties in more upmarket suburbs such as Summerstrand, Walmer and Walmer Heights because of the higher rents for apartments (from R6,000 to R7,000 per month), townhouses at R8,000 to R8,500 per month and freestanding houses at between R10,000 and R12,000 per month. Upmarket rental properties stay on our books longer.”
Rodgerson says that while RE/MAX Bay Properties’ rental book remains fairly full, there has been a reduction of stock in the last 12 to 18 months as a result of rental properties being sold and owners deciding to self-manage their rental homes to save the 10% commission charged by estate agents.
“Managing rental property is not a simple matter and most estate agents provide full value for the commission they charge,” he says.
Rodgerson says the demographics of people who prefer to rent range from students who need to be close to the university and therefore choose beachfront properties such as garden cottages and flats, to young couples starting out who mostly prefer townhouses or flats on the beachfront or in the western areas, to families that prefer the western areas and single people who opt for affordable properties on the beachfront, South End, Walmer or Lorraine.
Just Property PE agent Robyn Stanford, who is a rental specialist, quotes TPN’s market strength indicators, which factor in supply and demand ratings, to show that the Eastern Cape is outperforming all other regions nationwide.
“The Eastern Cape has a TPN market strength index of 68.8 as opposed to KwaZulu-Natal and the Western Cape at 51. Gauteng has a market strength index of 44.1 as supply exceeds demand significantly,” says Stanford, noting that trends indicate a slight increase in rental prices averaging at between 6% and 8%.
The best performing suburbs for average effective yield in Port Elizabeth are North End, where properties are in the high-demand <R7,000 monthly rental bracket (16.8%); Newton Park, where many small businesses are based (13.7%); and PE Central, where properties are also in the high-demand <R7000 monthly rental bracket (12.3%).
“Factoring in capital growth, the best performing suburbs currently are North End (21%), Newton Park (16.9%) and PE Central (16%),” says Stanford. “Other areas that are popular with investors are Walmer, Lorraine, South End, St Georges Park, Summerstrand and Humewood because they are considered to be central with easy access.”
Stanford says reduced rents are being recorded in suburbs such as Robyn, Veronique, Central, Bluewater Bay and Richmond Hill as a result of the high crime rate and a lack of secure parking.
Paul Stevens, CEO of Just Property, forecasts that the current condition in the rental market of “high vacancies and low escalations across most of the country – fueled by lower-than-normal demand – will continue into 2019”.
“Historically, we have seen rental demands increase during tough economic times,” he says. “But this is not happening now. Our data partners, TPN, report that average tenancy periods have increased to 18 months and the average age of tenants is now 32 (up from 24 in 2008). Their data shows that fewer people are entering the rental market and that the majority of those who are, rent for less than R7,000 per month.
“The short to medium term opportunities for property investors and landlords therefore lies in properties that allow for multi-generational living and in properties that can be rented for R3,500 to R7,000 per month.”
Words: Blake Wilkins