Property Talk

Vacancy Survey for the Residential sector

If you are the owner of an investment property and have been struggling to place a tenant, the recent Tenant Profile Network (TPN) Credit Bureau Vacancy Survey for the Residential sector provides some interesting insights into the current state of the rental market.

TPN is a specialized Credit Bureau providing excellent data regarding the financial position of Tenants to the Rental Market. By collecting data on a monthly basis of thousands of South African Tenants, TPN is able to measure and understand emerging trends as they develop. The TPN Report looks specifically at the national and provincial market strength, the vacancy rate and the rental price across various bands.

The overall TPN Market Strength Index on a national basis for the first quarter of 2019 is slightly up on the prior two quarters and is currently recorded at 52% where 50% reflects the balance between demand and supply. The third and fourth quarters of 2018 were recorded at 49% and 48% respectively making the current uptick a marginal improvement.

Other than the Eastern Cape there has been an increase in the Market Strength Index across all the provinces. KZN has improved from 56.7% to 62.1%, which is ahead of The Western Cape at 51.9% and Gauteng at 46.8%.

Gauteng is the only province currently below the 50% equilibrium point and is experiencing a marginal oversupply of rental stock. Despite the improvement in market strength overall, the national vacancy rate is recorded currently at 8.64% which is the highest since the inception of this survey in 2016.

The rental escalations are currently recorded as 4.85% nationally across all the tenancies surveyed. This national benchmark is very useful for Landlord's as a tool to determine if their specific escalations are above or below the national average.

At a Provincial level only two provinces showed a quarter-on-quarter improvement in vacancies - Gauteng and KZN, recording 7,9% and 6,4% vacancy rates respectively. KZN seems to be showing a steady long-term decline in the vacancy rates.

The KZN vacancy rate has declined for five consecutive quarters since the level of 9.9% recorded in the fourth quarter of 2017. Interestingly only the Eastern Cape has a lower vacancy rate currently measured at 5.1%.

When Market Strength is considered according to Rental Price Band we see that the Less than R3,000 p.m. segment has strengthened the most to 62% ahead of the R3,000 to R7,000 p.m. band which strengthened to 53%.

Vacancy Rates in the more than R12,000 p.m. rental price band tell a different story however showing the highest in its recorded history at 15.4%. This is a significant rise from the 11.2% one quarter before and the 9.6% recorded a year before in this price band. All the other price bands have vacancy rates reasonably similar around the 8% level.

The financial stress being experienced in the overall economy and property market is also being felt in the higher rental price brackets at the moment and rentals at the higher rates may find it harder to find suitable tenants or to escalate rental rates as they have done in the past.