The South African PayProp Rental Index has shown that the average rental in South Africa breached the $500 threshold ending the fourth quarter of 2016 at $558.
The quarterly PayProp Residential Rental Index is drawn from the actual payment data of 1 000 rental agencies which administer a total of 85 000 active leases.
PayProp Group CEO, Louw Liebenberg, says the highest percentage growth for the quarter was recorded in December 2016, when average rentals were 7% higher than the same month the previous year.
As average rental values increase, Liebenberg says it is not unusual to see a migration from the lower to higher rental price categories. The largest jump in the final quarter was in the under $1,140 category where the proportion of all rentals grew from 4.8% to 5.9%.
The Western Cape improved on its steady 9%-plus growth rates to breach the double digits and hit 10.99%. On the other end of the spectrum, the Northern Cape continued to decline to just 2.11% from a high of 16.74% in 2015.
Limpopo has sights set on it, as for several years the province topped the ranks with the highest average rental. This was largely due to an industrial development boom in the area which led to soaring demand for rentals fuelled by limited stock availability.
According to Liebenberg, once rental property costs are taken into account, net yields on investment properties still show growth. A growth rate up to 5.3% from 4.8% at the beginning of 2015 bodes well for the investor community.
While gross yields grew 6 basis points, net yields only grew 5 points – indicating that the cost of owning a property has increased marginally faster than the growth of rentals.
While average declared income remained flat, there was a drop in the amount required by creditors for debt repayment from $902.97 per month in January 2015 to $850.1 at the end of the year.