November 18, 2020

Why now might be the perfect time to sell the property you’re renting out

Contrary to all expectations, the COVID-19 pandemic and resultant lockdown has created a boom in South Africa’s property market — but the rental market isn’t sharing this upward swing. Instead, rent in 2021 is set to be cheaper than it was this year. So if you own property that you rent out for extra income, it might be time to consider selling up and investing that money elsewhere. 

On average, rent has increased by 6% year on year, but new data released recently from FNB predicts negative growth into the new year with rent lower than it was before.

This comes as COVID-19 has forced tenants to move in with relatives or friends, leaving around 11% of all rental properties vacant, according to the Tenant Profile Network – and landlords are having to lower what they ask for every month in order to entice new leaseholders.

The hardest-hit market is high-end rental properties (anything that costs more than R25 000 per month), which has a vacancy rate of about 25% percent. On the other end of the scale, small apartments or townhouses with rent between R4 500 and R12 000 seeing a vacancy rate of 10%. 

At the same time, the residential property market is flourishing, especially among first-time home buyers. 24% of people who are buying property are doing so for this first time. This is evident by the fact that houses are now on the market for an average of 10 weeks and 6 days, which is the lowest amount of time in more than a decade.  

A major driver in this trend is the low interest rate.  People who can afford to rent, despite COVID-19 and a tough economy, are seeing that a bond instalment is similar to or less than rent for a similar property, the bond instalment does not escalate every year and they are paying toward their own asset, and not someone else’s.

And there are plenty of other benefits of taking out your own bond at the moment. According to FNB, due to the South African Reserve Bank’s interest rate cuts, your monthly repayment on a full bond will be about three-quarters of what it would have been four years ago. Over and above that, the government is offering a first-time home buyers subsidy to people earning between R3 501 and R22 000, if they meet certain criteria.

While rent is decreasing, property price is increasing (FNB estimates that the average house price rose by 3.14% in September), meaning that while it might be a seller’s market, buying is an attractive investment option.

As a seller, you have the right to choose the conveyancer who transfers the ownership of your property. To speak to us, call 011 347 0300 or email info@lawmen.co.za.

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