Figures researched by the Rawson Property Group clearly indicate that gross rental incomes on residential property in South Africa compare favourably with those of Australia, the United Kingdom and the USA – even when the relative inflation rates are taken into account.
In Australia the figure is 3,64%, in the UK 4,31% and in the USA 4,69%. The USA, said Tony Clarke, Managing Director of the Rawson Property Group, is however especially suited to buy-to-let investment on account of one major fact – their capital gains tax on property is only 5%.
Rawson’s figures show that buy-to-let properties in Cape Town’s better areas, such as the Atlantic Seaboard, give rental incomes of 5,78% to 5,84% on the current value of the properties.
By contrast, said Clarke, a recent survey of freestanding and townhouses in Johannesburg’s Bryanston, Morningside, Sandown, Rivonia, Dainfern, Lonehill, Witkoppen, Fourways, Athol, Rosebank, Dunkeld, Saxonwold and Northcliff suburbs has indicated that rents have now risen so fast that returns of 6,2% are now being achieved from day one. The properties surveyed, in fact, had rentals varying from R4,600 to R90,000 per month and, said Clarke, are typical of homes in the top bracket in Johannesburg. The Rawson survey did not, however, cover the lower priced areas, even though these have also proved suitable for buy-to-let investors.
Clarke said that, with bond mortgages still very difficult to get and new stock from developers limited, demand for rental property is bound to increase, pushing rental returns to a level which investors will find out-perform that of other asset classes.
“Despite the latest FNB predictions that the growth rate in house values is now about to enter a slowdown period, we can, I think, confidently expect most property value increases to keep pace with the South African inflation rate. With rental returns, therefore, at the levels indicated, buy-to-let investors choosing wisely and selecting a good managing agent are assured of a sound return on their outlay and slow, but steady capital growth.”
