Findings from the TPN Rental Monitor Report Q3 2023 reveal a crucial aspect of South Africa’s housing market: affordability is at the forefront for many. Over half of the rental market falls within the R3,000 to R7,000 rental value bracket. This statistic not only highlights the prevailing economic conditions but also underlines a critical segment of the market where cost-effectiveness is vital.
Sources: TPN Credit Bureau. Residential Rental Monitor 2023 Q3
Current average rental prices across various provinces reflect this economic landscape. For instance, in the Western Cape, the average rent stands at R9,946, while in the Northern Cape, it’s slightly lower at R9,262. Gauteng and KwaZulu-Natal have average rents of R8,777 and R8,749, respectively. These figures prove how difficult it is for a large portion of the population to find affordable housing.
However, a room-based renting approach offers a feasible solution. By renting out rooms, tenants find a significantly more affordable living option. For example, a two-bedroom apartment that would normally rent between R7,000 – R12 000 would become affordable to an individual shopping in the R3,500 – R4,500 rental bracket as they can afford to rent a room and share the costs of the living space. This approach is especially sought after in student accommodation and affordable housing developments, where there is an insatiable demand for rentals in this rental value bracket.
Therefore, a multi-let strategy has become extremely attractive to investors seeking to benefit from such demand. Furthermore, it provides investors with above-average rental income and higher gross yields. In addition, by diversifying tenants, investors mitigate the risk of income loss and maximize property use.
Moreover, multi-let properties offer a degree of resilience against market fluctuations. During economic downturns, these smaller, more budget-friendly units maintain their appeal, even as larger, pricier properties may see a dip in demand.
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Multi-let properties provide cashflow-positive property investment opportunities and the ability for investors to generate passive income. However, this investment method goes beyond mere financial benefits; it plays a pivotal role in addressing the housing shortage in South Africa aligning with both economic and social impact goals.
