I rented a 2 bedroom duplex in Parklands for a year and two months starting the 1st of January, 2006.
The rental was R2700 per month. The levies were R500 odd per month. The rental agent took 15% (yes, fifteen percent) commission leaving the landlord a nett amount of R1795 per month.
The return on this propert valued at R500 000 property is therefore about 4.5 % which is even worse than what you would get from a multimillion rand property.
When I moved in this complex, there was another duplex for sale for R549 000. It was for sale for over 8 months and then got taken off the market. Seems like there were no takers.
Towards the Oct 2006 another duplex went for sale at R529 000. That was sold in Feb 2007 and I would love to know what selling price was achieved. The owner must have netted below R500 if you take off the agents commission.
In effect, these duplexes are seeing absolutely no capital growth and very low return on investments. And they are situated in a suburb that is offering the best value for money in Cape Town.
When I moved out, the new tenant carried on paying a rental of R2700 per month. So its a year later and the rental has not been increased.
09 May 2007
From The Trenches: Parklands
Here's a comment on a previous thread I thought I'd highlight. If you have any other housing related experiences let us know at capetownbubble@gmail.com.
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2 comments:
FROM CJ
My rent on a R2m 2 bed townhouse in a top CT suburb is R4800. Take away rates and maintenance costs and the landlord is earning R40,000 a year from it. If he sold the place and put the cash in the bank he would be earning R190,000 a year.
If he had a full bond on it he would be losing R220,000 a year in interest and costs.
Add in a high risk of property devaluation over the imminent crash years ahead and you realise how house prices are ridiculously too high when compared to the rents that can be earned.
Buying a house in this market is for suckers - I can live in the house by paying my landlord R60,000 a year or by paying the bank and tax man R260,000 a year ... and that's before we even factor in the additional buying and selling costs which will be a further 300,000 ...
In 4 years when house prices have dropped 40% and rents have gone up 30%, the ratios will start looking a little better ... until then renting is the ONLY option if you care about using your money wisely.
CJ,
Just to compare to Joburg. I've just sold a two bedroom flat (1 bathroom, 69m2) in Westdene, Joburg for R480 000 (paid R250 000 in 2003, so I've done ok - thanks bubble). I was getting R3000 p/m, letting privately, but when I started selling the agent said I could have been getting closer to R4000. That is what the new owner will be renting for. My point is that he is getting a FAR better return than the owner of your R2million place.
What would possess someone to rent a R2m pozzie for R5k a month???? This also confirms that Cape Town is way out of whack with the rest of SA, even. It's going to get nasty down there when this comes to an end....
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