Rental demand driving buy-to-let sector 

Residential sales activity among end-user buyers might be flagging countrywide, but the spokesperson for one of South Africa’s leading real estate brands says interest among buy-to-let investors in touch with demand for rental stock is “visibly rising”.
Speaking from Acutts Estate Agents’ head office in Durban this week, group chairman Pat Acutt identified investor buyers as among the most dominant players in the market place at the moment.  
This was to be expected in today’s market, he explained, where reduced affordability on the back of the stringent lending criteria of the National Credit Act had become a major obstacle to home ownership. 
 “Since last month’s decision by the Reserve Bank to keep the interest rate unchanged, and the subsequent drop in the price of fuel, the market has started to turn.  There are, however, many people who either cannot afford to buy at the moment or who want to rent until the interest rate starts coming down, hence the demand for rental properties.”
 He continues: “Ultimately, most people want security of tenure, which inevitably means buying their homes.  In the absence of that though, these same people become tenants, effectively applauding the buy-to-let investment stance by ensuring regular and reliable income streams that allow landlords to service their bond repayments.  For as far back as I can remember, rented properties have out-performed most other investment vehicles and kept ahead of rising living costs.”
 All well and good, he says – provided prospective landlords do their homework before buying.  “The first consideration is what and where to buy.  My advice in this regard is to heed the market and invest where maximum demand, and therefore the best returns, is to be found.  Generally, this is in the apartment and family house sectors, given that the dominant feature of the current rental market is affordability.”
 He then warns against over-extending themselves financially, and reminds buyers to factor maintenance and repair costs into their budgets.  “Tenant turnover inevitably means some sort of cost to the landlord, whether in damages or as a result of periods of vacancy.  And while on the subject of money, remember that rental income is taxable.”
 Once the property has been bought, the next challenge will be to find good tenants.  Says Acutt: “The success of the investment will depend on how well prospective tenants are vetted.  Accordingly, the owner needs to do everything possible to ensure the selection of quality tenants who will pay their rent on time, every time.” 
 In line with heightened rental demand, which typically accompanies a buyers’ market, Acutt says his company has positioned itself among the “reputable estate agencies” in terms of gearing up existing letting systems and rental divisions. 
 “Talk in our profession is of gearing systems to include a full rental service,” he says.  “This invariably means growing our incumbent infrastructures and ensuring that our rental divisions are up to speed with the tenets of the law and able to offer best advice.” 
 With expectations that the present market slump will start recovering from mid-2009, Acutt says he agrees with Absa senior property analyst Jacques du Toit that property is a medium-to-long-term investment.  Quoting Du Toit’s report of 15 July, titled “Investing in residential property”, Acutt says it’s now a good time to buy investment property, even though true capital appreciation will probably only start manifesting in about two years from now.  “I say this because prices have sharpened and there are a lot of good buys to be had at the moment.”
 By Ingrid Oliver