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May 08 2008

Buy-To-Let Market Becoming More Attractive

Posted in Property Finance, Property Matters

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The buy-to-let market saw significant growth from 2003 – 2006 as a result of a favourable economic climate and low interest rates. This made it easier for prospective buyers to own property which resulted in:
1. Fewer tenants, since more tenants could afford to buy their own property
2. A surge in rental properties coming onto the market as more people bought properties in order to rent them out

As a result of this, rental yields began to drop. (High supply and low demand means lower prices.) In the current market, where the National Credit Act (NCA) and interest rates have negatively impacted on a buyer’s ability to qualify for a home loan, there are fewer qualified buyers resulting in a return to renting rather than buying property.

This coupled with the increasing cost of living (rising petrol, food and electricity prices) may also force many home owners to sell their properties and enter the rental market as repaying their bonds becomes more and more difficult.

These conditions benefit an investor as more tenants come into the market and the increased demand results in both easier letting of properties and higher yields.

So, whilst many buyers are adopting a ‘wait and see’ attitude, astute property investors are buying up properties at good prices (due to the current market) and renting them out at good returns.

Jessica van Stittert

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  • Southern Suburbs, Cape Town