There has, says Tony Clarke, MD of Rawson Properties, been a surprisingly good response to his groups recent announcement that they have set up a franchise selling division for letting operations.
'Those who understand the property market are saying that acquiring such a franchise would right now be a shrewd move because this sector will show good returns in the next few years'
Is this belief justified?
'Let us first look at the rental track record,' said Clarke. 'Rental income at Rawson properties increased by 700% in the last ten years and in the last financial year the increase was just over 30%'
These significant rent rises, he said, are due to a variety of factors, the chief of which are that
· in the post-National Credit Act and recession era mortgage bond finance has been cut by ±45% and made the purchase of a new home very difficult for thousands of people. The only alternative has been to rent.
· buy-to-rent investors, making the most of the low interest rate and properly gearing the purchase, have been active in the market despite the need in most instances to subsidise their rents and despite rents themselves no longer increasing at their former high annual rates; and
· the lack of new stock coming onto the market as a result of developers being unable to get finance. This has steadily increased the stock shortages. Right now, says Clarke, unsold development stock is still coming onto the rental market '“ but this source of rental accommodation will also soon run dry, exacerbating the current shortages of accommodation (60% of Mitchells Plain families already have one or more relations or friends lodging with them.
The demand for rental property, added Clarke, has also been boosted by political uncertainty. Some white South Africans '“ especially those below 30 years of age '“ are no longer prepared to commit to a long term home loan because they fear that the country may go to ANCYL route and adopt nationalisation and other policies inimical to free enterprise and wealth creation.
In the scenario which he has outlined, said Clarke, ongoing rent increases can be relied on, even though the annual increases are likely to be lower in the near recessionary conditions that now prevail '“ and those administering rented property are assured of a good future.
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
