One need only to look at various social media pages and websites like Property24 to see that there is something amiss in the Hermanus short- and long-term residential rental markets. As confirmed by a number of local rental agents, there has been a noticeable increase in the number of properties available for long-term rentals and an ever-increasing growth in holiday rental properties.
There is such an oversupply of holiday rental properties that it has reached a point where nightly rentals are being significantly reduced because of the relative lack of demand, particularly outside of the peak season. More and more properties listed for long-term rental are also showing ‘Reduced’ banners on their listings. Visitors are spoilt for choice to the point of confusion and many people who thought listing their properties on Airbnb and similar websites would make a killing, are disillusioned, irrespective of whether their expectations were realistic or not.
Some agents say that they have more unlet properties on their books than ever before, many properties are on the books of multiple agents and the price point for many of them is way above the affordability level of most long-term rental seekers. Whilst the majority of properties available are in the R12 000 p/m and above bracket, the biggest demand is in the R4 000 to R 10 000 p/m bracket.
The greatest shortages are in 1- or 2-bedroom flats or cottages and accommodation for singles, young couples or elderly people, and this is in direct proportion to the lower salaries (or pensions) earned by many in the Overstrand. Agents generally feel quite helpless as there is nothing available for this demographic, including pensioners living on small budgets.
Many home owners who are seeking extra income to counter general economic challenges are clearly not taking price and reality-check recommendations from agents; this was confirmed by all we spoke to. The expectations are largely unrealistic and the net result is that properties remain unlet for long periods of time. Eventually, it is at a point of desperation that the owners drop their rental prices or they place the properties on the market for sale. The fact that there has recently been a spike in the number of properties for sale is a clear indicator of this trend.
Whilst there isn’t much demand for furnished accommodation, the big deterrent for most home owners is tenants with pets, even though they themselves may have pets on the property. There is also an indication that many home owners letting their properties want the best of both worlds by aiming for the highest rental, trying to restrict the rental contract to only 9 months of the year so that they have access to the property in season, yet are so prescriptive regarding tenant criteria that they end up having an unlet property.
In contrast, when existing leases come up for renewal, some landlords are being more flexible and agreeing to lower annual increases in order to keep good tenants, rather than lose them and risk ending up with no tenant or new ones that do not look after the property in the same way.
The general consensus is that buying, selling or rental decisions by property owners are up in the air until after the elections. Thereafter, there could well be a correction in the rental market, bringing everything back to some sense of reality, with all cylinders firing in unison.
What is very evident, though, is that for a community-focused property developer, there is a massive opportunity to produce housing at the right price for the largest percentage of rental tenants, be it apartments, container housing, or similar initiatives, which would go a long way towards addressing market needs.