Renting a property is painful, in that the money you fork out each month doesn’t bring you any closer to owning where you live, but at least you’re not servicing a bond.
For residential property landlords who bought with the idea of letting them out, either via Airbnb or long-term rental, the past year has not been kind.
According to the latest research from credit bureau TPN, average rentals across South Africa are falling for the first time in 13 years.
Gone are the days of an annual rental increase of around 6% to 10%, with the financial crunch of the COVID-19 pandemic making it tough for tenants to pay the bills.
The Daily Maverick points out that this has put many landlords in a tricky position:
…either pass on rental increases and risk losing good paying tenants or drop rental prices and hang on to tenants (even though monthly utility costs are rising by double digits)…
According to TPN, which monitors rental industry trends, the average rental value deflated by -0.75% year-on-year in the fourth quarter of 2020, a period in which SA was still deep into lockdown. In other words, landlords are no longer making much money from their buy-to-let properties.
The Western Cape and Gauteng markets have taken very noticeable dives, when plotted against national escalation:
In 2017, according to data and analytics firm PayProp, rental growth rates were above 7%, before remaining at between 3% and 4% for 2018 and 2019.
When comparing the fourth quarter of 2019 with last year’s fourth quarter, the average rent increased from R7 844 to R7 854 – a measly R10.
There is also a surge of tenants unable to pay rent on time:
According to TPN, tenants in good standing with their rental payments reached 77.61% in the final quarter of 2020 — a percentage that is still significantly lower than the 81.52% recorded pre-lockdown during the first quarter of 2020.
Thankfully, getting a foothold in the property market, or building up your property portfolio, doesn’t always have to come with tenant worries.
Flyt Property Investments, which is Section 12J compliant (you can get a tax refund of up to R450 000 for every R1 million invested in Flyt’s property developments), has already sold out three developments in Cape Town and Stellenbosch (some 155 units).
Part of the appeal is the flexibility, as you can buy an individual unit (through Flyt Select), or partner with Flyt and other investors (Foyt Partnership).
In both cases, 100% finance options are available if the investor is short of cashflow.
Rumour has it that Flyt are launching their latest development n the coming weeks, which not only secures investors a massive tax break, but also comes with a five-year fixed rental guarantee.
In today’s market, that is some serious peace of mind.
Section 12J of the Income Tax Act will expire from the beginning of July 2021, so there’s no time like the present. You can register your interest in that new development, and find out more about securing tax breaks using Section 12J, here.
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