Business and Leisure Tourism Boosting Cape Town Rentals
Business and leisure tourism along with the continued migration of people to the Cape metro is set to boost the rental market, while the weak economic outlook and resultant interest and cost hikes will be an added boost.
This three bedroom apartment in Clifton,Cape Town, is renting for R150 000 - click here to view.
This is according to Samuel Seeff, chairman of the Seeff property group, who says their group has seen an uptick of about 20% year-on-year in their rental business over the past two years, and while overall sales volumes are expected to contract this year, rentals are expected to boom.
He says the coastal location, lifestyle, good governance and calendar of high profile events are key drivers of the rising demand that has seen top-end rental rates in Cape Town surge well ahead of those in Johannesburg.
“While the lower- to mid-market sectors are likely to see the biggest jump in demand as a result of the economic fallout, our agents expect a strong market almost across the board, not just for long-term rentals, but also for short-term lets.”
Seeff says Cape Town Tourism reported record visitor numbers over the December period, and this has meant good business for the rental market. The tourist season is still running until the end of April for foreigners, but the annual Easter and school holiday influx of local visitors should keep the market active.
Add to this a busy calendar of major events, kicked off with the Mining Indaba and opening of parliament, he says.
Seeff says big sporting events such as the Rugby 7s and New Year’s cricket test at Newlands brought crowds to the city, including a large contingent of the travelling British ‘Barmy Army’, most of whom needed accommodation. This month it is the Cycle Tour and Two Oceans Marathon, then the Jazz Festival in April and so on.
This apartment in Camps Bay, Cape Town, has three bedrooms, an open-plan lounge and patio. It is available to rent for R60 000 - click here to view.
“We also expect the influx of people relocating from other provinces, especially the northern areas, to continue - and potentially even pick up - further pace this year,” he says.
“Many of these people choose to rent for an initial period before deciding where they want to settle, obviously providing an added boost for the Cape rental market.”
Seeff says then there is also the additional demand that comes from the corporate rentals market.
“We are now in the midst of the busiest season for especially long-term rentals. Aside from renewals, this period usually sees a major influx of people wanting to either relocate or get into their own place,” he says.
Many areas are still seeing stock shortages, and although this will no doubt encourage landlords to bump their income expectations, Seeff says landlords should be mindful of the worsening economic climate.
He says affordability is going to be a serious drawback for the rental market, with especially low- and middle-income earners likely to face difficulty to meet rising rental rates.
“We are therefore likely to see yields stagnate, even at the top end of the market,” he says.
“Where rental yields improved over the past two years to as much as 7% to 10%, this is likely to come under pressure as the year progresses, and we could see this dip to around the 5% to 7% range at best.”
This five bedroom house in Constantia Upperis available to rent for R130 000 per month. Click here to view.
Seeff says the Cape property and rental market is still in a healthy position and there is more than enough strength to maintain good activity this year.
At the top end of the market, areas such as the Atlantic Seaboard and City Bowl and Southern Suburbs now command rental rates of about 30% to 40% higher on average compared to Johannesburg’s wealthiest areas such as Sandhurst,Westcliff and Dunkeld, he says.
The gap is similar when it comes to an upper middle class area such as Northriding that boasts an average rental rate of R11 500 for a three bedroom cluster. Comparatively a similar home in Big Bay on the Blouberg coast achieves about R15 500 per month on average.
The top five suburbs of the Atlantic Seaboard, namely Clifton, Camps Bay, Fresnaye, Bantry Bay and the V&A Waterfront boast the highest rental rates in the country. At the top end, Clifton now ranges to about R150 000 per month for a luxury apartment with direct beach access - R200 000 per month does not look too far off, says Seeff.
Luxury villas in Camps Bay, Bantry Bay and Fresnaye now rent out for upwards of about R40 000 to R50 000 per month, ranging to about R80 000 to R100 000 at the top end for a luxury home with sea views.
A two bedroom apartment at the V&A Waterfront can achieve about R30 000 to R40 000 per month, and a luxury unit on the Front Yacht Basin can go for as much as R45 000 to R80 000 per month during the high season.
This apartment in Waterfront, Cape Town, has just been rented and was advertised at for R26 000 per month - click here to view.
While you can still find a modest three bedroom house in the Southern Suburbs for around R30 000 per month, he says the average rental price for a luxury home in suburbs such as Constantia Upper and Bishopscourt now ranges from about R50 000 to R60 000 per month, with top-end rates now reaching R100 000 to R120 000.
Seeff says even the western and northern side of the city has seen rental rates rise considerably. For example, where you could still find plenty of houses to rent below R12 000 per month two years ago, you can now expect to pay up to R40 000 to R50 000 per month for a luxury house with sea views inBloubergstrand, Durbanville and Plattekloof.
While the expected strong demand is good news for landlords, Seeff says they will need to watch the market carefully and may well need to adjust their rental expectations.
“Bear in mind that unreasonably high rental rates may well result in financial losses, not only because tenants are going to battle to meet their monthly payments, but you may end up with legal costs and possible vacancy periods,” he says.