How is the rental market affecting your Cape Town property?
Category Rental Property Market
The rental market in Cape Town is heavily influenced by the presence of property investors, who play a significant role in shaping the real estate landscape. One of the key metrics that investors use to evaluate a property is the net rental yield, which is calculated by dividing the total annual rental income (minus expenses multiplied by 12 months) by the market value of the property.
Historically, Cape Town's property market has experienced a steady growth in capital appreciation, with a year-on-year increase of 5-10% over the past two decades. As a result, many investors are willing to accept lower net rental yields, as they are compensated by the growth in property value.
The recent rise in interest rates and inflation has made bonds less accessible to many consumers, leading to an upward trend in rental prices. This increase in net rental yields has attracted many investors back into the market, helping to support property prices even as the "buy-to-live" segment cools down.
The popularity of Airbnb and other short-term rental platforms, along with the growing number of tourists visiting the Western Cape, has also contributed to a resurgence in investor activity. It is expected that demand for rental properties will continue as consumers are pushed out of the buy-to-live segment due to rising inflation, tightening lending criteria, and increasing interest rates, which will hopefully support current price levels even in the rising interest rate environment.
If you're interested in determining the value of your property in this dynamic rental market, click on the button below to generate a digital valuation.
Author: Quay 1 International Realty
