Rental market decline has been overstated'

Posted On Tuesday, 04 May 2004 02:00 Published by
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The residential rental market's decline has been overstated because of the way in which rental returns are being calculated, says Raal Nordin, CEO of Just Letting
The residential rental market's decline has been overstated becauseof the way in which rental returns are being calculated, says Raal Nordin,CEO of Just Letting.

Nordin says investors saw the market decline from about 1% a month returnon investment to about 0,8% a few months ago; today buy-to-let investorsare obtaining about 0,75%.

"On the face of it, the obvious conclusion is that the rental markethas softened further. However, on closer examination, it is sales trendsin the broader property market that are affecting rental returns."

Nordin says that when demand for residential rentals was high, investorswere obtaining rental returns of 1% on the value of their properties (R5000 on a R500 000 property). This declined to about 0,8% a few months later(R4 000 rental on the same property).

He says the rental amount being achieved in real terms has remainedat R4 000 today, but the property now fetches a much higher price , andthat it is the value of the property that has affected investors' returns.

"Residential property is still a wise investment, but investors mustbe well informed of the returns they can realistically expect to obtainfrom rentals," Nordin says.

Business Day

Publisher: Business Day
Source: Business Day

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