Several franchises in the Rawson Property Group have in recent months reported a detectable upswing in their areas with regards to the number of investors buying residential property with the specific intention to let it out. This has now been confirmed by the latest FNB Property Estate Agent Survey dated 10 July 2012.
According to this report, the second quarter of 2012 figures suggest ‘slightly weaker overall demand for residential property’ is being compensated for by a slight rise in the ‘buy-to-let’ market.
FNB reports that buy-to-let purchases have edged up to 11% of total purchases. This is 1% higher than the figure reported in the previous quarter and 7% above that of the early 2011 low point.
“The FNB report does make it clear that 11% is less than half the 25% achieved in early 2004 at the height of the property boom,” said Bill Rawson, Chairman of the Rawson Property Group, “but it is nevertheless significant and should, I believe, tell potential buy-to-let investors about the possibilities this field is now opening up - especially when returns here are compared to those of the money market.”
“FNB also point out,” said Rawson, “that with house prices now increasing year-on-year at 8, 9%, the 4, 7% annualised rise in rentals is still well below house price inflation and this is not a very satisfactory situation”.
“But,” said Rawson,” these figures have to be assessed in conjunction with the current house prices which are now anything from 5% to 20% below their previous peak levels. In my view, it makes excellent sense to buy now, in the confident expectation that by mid or late 2013, rental inflation will be on a par with house price increases which, due to the current shortages in supply, are likely to continue to grow at a very satisfactory rate.”
Rawson added that FNB have also shown (using TPN statistics) that tenant behaviour and payment are on the whole now ‘fairly reliable’. In the first quarter of this year, 81% of tenants were in good standing, he said, the best payers being in the R3000 to R7000 per month rental bracket (where 83,5% of tenants where paying on time or within one week). Those in the below R3000 per month segment (where only 72% of tenants were in good standing) tended to be the worst payers.
“With this type of investment it has to be accepted that there are very few quick profits to be made nor are the long term returns spectacular. But there is no safer or more assured investment class and it is one that carries with it the great consolation that it’s very difficult for facts to be hidden and for the investor to be left in the dark as to what is happening with his asset as, regretfully, can be the case where the asset is controlled and managed by an often anonymous third party.”
