Buy-to-let property looking more profitable
The PayProp rental index reported a 10, 4% increase in rentals in September 2013. According to the Financial Mail, this has been the biggest rise in rentals recorded by PayProp rental index in the last three years. This spike in rentals was most significant in the third quarter of this year after a five year long slump from 2008.
This recent development is great news for people looking to invest in buy-to-let property. TPN’s Rental Monitor also reported that there has been an increase of 86% in the number of people who pay their rent timeously.
“Landlords are clearly contracting with better qualified tenants, consequently rejecting the lure of simply signing the first deal with cash in hand” says Dexter Leite, rentals director at Pam Golding Properties.
In April 2011, rental growth dipped to below 6% and many people who had invested in buy-to-let property had to be satisfied with reduced rental increases of approximately 4-6% per annum.
There has also been a noticeable shift in the kind of property that sells in the market. Prospective buyers who want to rent out their property are generally only interested in cheap property which offer yields over 7%. These would be rentals that are priced below R700 000 and cost between R3000 – R6000 to rent. However, this is not always the case as can be seen with the corporate rental market at the upper end which is also experiencing better returns on property investments.