Home arrow Business & Economy arrow Investors look to buy-to-rent market again

Investors look to buy-to-rent market again

Wednesday, 09 June 2010
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An increasing number of investors are buying residential properties in SA to rent them out
Returns on investment in the property market in South Africa are looking better and better. According to Rawson Properties, there has been a steady stream of investors returning to the buy-to-let residential property market.

“In the 2000 to 2005 period house sale prices increased at a far faster rate than rentals, making the yields on rented property increasingly less attractive,” says Tony Clarke, Managing Director of the Rawson Properties Group.

“Since the last quarter of 2008, however, the situation has been very different: house price increases in the recession were few and far between and even now they are rising at a much slower rate than previously.  As a result, Rawson’s rental return figures in the first quarter of this year were just on 15% higher than those of the first quarter of 2009 and we expect further rises soon.”

Previously, increases in Gauteng rentals had been higher than those of the Cape, but the rises are in fact now occurring countrywide.

“It always surprises me that there are not more investors in buy-to-rent property,” says Clarke. “It is one of the few asset classes where you can finance your purchase with a bank loan and you can collect monthly rents to help pay off your bond.”

Rawsons says it has a growing core of clients that are steadily building up portfolios in new developments and bidding at auctions.

“Every one of the sales made by the new auctions team has, in fact, been to an investor,” says Clarke.

Shrewd investors are also making use of associations that property groups have with banks which offer over-indebted bondholders quick-sell options to sell their properties below market value.

According to Rawsons, these properties usually sell at 20% below market value.

“The flow of such properties onto the market is likely to keep prices down and raise average monthly rental returns from their current satisfactory 0,8% of the property’s value to 1% by early 2011, i.e. 12% per annum.”

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