High interest rates and the implementation of the National Credit Act (NCA) may have caused a slowdown in residential property sales, but they’ve also created a surge in demand for rentals.

Dexter Leite, Pam Golding Properties’ rentals director for the Western Cape metro region, says the same factors which are creating barriers to purchase are driving would-be buyers to rent instead.

“The NCA has placed tighter restrictions on buyers’ borrowing ability,” says Leite, “while the string of interest rate hikes has also raised the cost of buying one’s home. With further rate hikes now on the cards this has all made it more difficult for entry-level buyers in particular to make their purchase. Many find that their disposable income simply isn’t sufficient to cover or even qualify for the required bond repayments. As a result, these would-be buyers have no choice but to turn to the rental market where the NCA does not apply when assessing ability to pay rent.

Upward pressure on prices

"It is no surprise then that our regional rentals division has experienced a busy end to the financial year, concluding 525 lease transactions in the four months from November to February alone. The increased demand for rental properties is also putting upward pressure on prices which are currently escalating at around eight percent per annum.”

Leite says the demand for rentals is coming not only from first-time home-seekers who cannot afford to buy, but also from students, contract workers and young professionals, both local and foreign. Renting is also popular with those just moving into an area — including the numerous Gautengers who are relocating their families to the Cape — as they try to get a feel for a suburb while searching for a home to buy. There is also ongoing seasonal demand for shorter-term rentals, chiefly from holidaymakers from other parts of South Africa and overseas.

For all these categories of lessees, location is a critical factor, including accessibility to schools and leisure opportunities. Proximity to work has become increasingly important in the wake of rising transport costs and traffic congestion. Security is another key factor influencing the rental decision.

Foreigners and tourists are attracted to the City Bowl

The demand for rental properties varies across Cape Town, with different areas holding appeal for different markets. The Southern Suburbs remain strongly in demand from families due to their proximity to excellent schools and the University of Cape Town. The central City Bowl tends to attract a younger and more cosmopolitan crowd, seeking to live close to work and enjoy the vibrant atmosphere and the lock-up-and-go lifestyle. Foreigners and tourists are also attracted to this area as a result of its proximity to the V&A Waterfront and the Atlantic Seaboard, as well as by its large variety of restaurants, bars, internet cafes and other entertainment facilities. The Atlantic Seaboard itself remains mainly the playground of the jet-set, with top-end rentals regularly achieved for luxury homes and apartments.

Those seeking a seaside lifestyle at lower prices are drawn to the Western Seaboard, increasingly popular with young families and young professionals as well as retirees. Value for money is also a key attraction for the Northern Suburbs, with the Tyger Valley Waterfront emerging as a trendy place to rent, while Brackenfell and surrounding suburbs are also in demand.

PGP’s MD for the Western Cape metro region, Laurie Wener, points out that, like the residential sales market, the rentals division has in recent months seen significant activity in the top-end bracket. “This has been particularly noticeable in the Southern Suburbs, City Bowl and Atlantic Seaboard,” she says. “Agents have been achieving significant results in these areas, including PGP records of R35 000 per month for a home in Oranjezicht, R46 750 per month in Camps Bay, and R50 000 per month in Bishopscourt — all for unfurnished, long-term rentals.”