Balwin launches rental business as fewer South Africans can afford to buy houses

Balwin subscribed for its 25% interest in Balwin Rentals at no cost, enabling it to share in 25% of the net rental income on an annuity basis.

Balwin Properties’ plan over the next few years before listing, is to build up a significant rental pool so that it will be in a position to rent out 2,000 units. It will at the same time sell about 3,000 units. 

Rentals will range from R4,500 to R8,500 a month.

“Our ambition has always been to develop and retain a rental model that would ensure annuity income for the company,” said Balwin CEO Stephen Brookes.

He said SA is entering a rising interest-rate environment, which bodes well for the rental business.

“It is defensive, as rentals are more popular in a higher interest-rate environment, while prospective clients opt to buy when interest rates are low,”  he said.

Research by TPN has shown that more South Africans have chosen to rent in 2018 because of weak economic conditions in which a lack of disposable income is making it harder to get deposits together to buy houses. 

TPN MD  Michelle Dickens said there is a slight oversupply of housing.

“The TPN national market strength index for 2018 quarter four is 49, which means we have a market with marginal oversupply given that 50 is a market in equilibrium. Anything above 50 indicates good demand and below 50 indicates oversupply,” she said.

Chareen Mota, Pam Golding Properties’ Hyde Park manager, agreed there is an oversupply of houses for sale.

“It is currently definitely a buyers’ market, with an oversupply of property stock in some places, giving buyers lots of choices, which in turn puts pressure on pricing,” she said.

More rental stock is being developed and coming onto the market.

Dickens said fewer people are also buying second properties and developers are aware of this.

“Currently 19.47% of property deeds transactions are for second property buying. This has been fairly flat since the property boom period in 2006 to 2007, when it peaked at 25.66%. Many developers are taking the view of holding onto a portion of their development as rental stock,” she said.

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