Vacancy rates decline as rental market stabilises

Vacancy rates decline as rental market stabilises

Category Rentals

Rental property vacancies have generally seen a sharp decline in the first quarter of 2022 compared to 2021 according to a recent TPN Vacancy Survey.

The company said that its first quarter rental survey shows that there has been a notable improvement in the rental market. This is good news for the market following the difficulties experienced in the 2020-2021 period due to the Covid Lockdowns.

In 2016 the average rental vacancy rate was at just 6.53%. It weakened to 8.75% in 2019 due to a variety of reasons. The onset of the Covid pandemic resulted in rental property vacancies deteriorating further to 10.23% in 2020 and 12.21% in 2021.

The good news is that for the early part of 2022, the average vacancy rate had improved notably to around 8.26% as measured in the first quarter of 2022. This equates to a recovery to the pre-pandemic and even pre-2019 levels.

In contrast though, average rental growth continues its weak trajectory and stands at only around 1.82% for the early part of 2022. Challenges for landlords include rising property costs including utilities while tenants are facing pressure on their monthly budgets due to rising costs of living. The weaker leisure and business tourism environment also continue to impact the demand for property.

Overall, the yields that landlords and property owners have been able to earn since around 2018 remain under pressure for a variety of reasons, most notably the economic decline which deteriorated further with the Covid Lockdowns. For most the pandemic period has been about limiting and minimising losses and retaining tenants in good standing.

According to TPN, the rental market in Gauteng has now grown to about 48% of all households. In the Western Cape, the rental market has remained steady at about 38% of all households.

Comparing the vacancy rates for the provinces, Western Cape improves drastically

The vacancy rate for the Western Cape has dropped to just 2.91% (down from 11.4%). Gauteng has also dropped to 8.69% (down from 14.66%) while the Eastern Cape has remained fairly static at 7.77%.

In contrast, the vacancy rate for KwaZulu-Natal has spiked to 13.26% (up from 0.34%), possibly due to challenges experienced in the province ranging from the July-riots to the floods.

Comparing the rental escalations for the provinces, Gauteng remains the weakest growth market.

When looking at the average rental growth, there has been little overall movement as rentals remain under considerable pressure. At just 0.72% growth year-on-year Gauteng remains the lowest although this is a notable improvement on last year’s negative growth.

Western Cape rentals have grown by around 2.74% which is also a considerable improvement from the negative growth last year. KwaZulu-Natal has also seen a notable improvement in average rental growth to 4.5% (from 3% last year).

Rental rates in the Eastern Cape ticked up by around 3.52% (a further improvement from last year’s just over 2% growth) while the other smaller provinces achieved the highest average growth of 3.96% (also a further improvement from last year’s 3% growth).

The importance of a legally compliant rental agreement cannot be overstated.

According to Seeff’s rental agents the rental landscape is becoming increasingly complex and challenging for property owners, landlords and tenants alike.

There are several different pieces of legislation which impact the sphere of rentals in one way or another. It is therefore always advisable that property owners and landlords work with a skilled rental agent to ensure their asset is protected and they can leverage maximum returns on their investment.

Making use of the services of a strong rental brand also provides peace of mind for tenants as they know they are dealing with a credible agent.

Author: Gina Meintjes