Practical often beats posh when renting

As inflation and interest rates continue to rise and eat into disposable incomes, it is becoming more difficult for prospective buyers to qualify for home loans, with the result that the demand for rental properties is rising rapidly.

And this is being boosted by those existing owners who are selling their homes and planning to rent for now rather than buy again, in an effort to cut their monthly expenses before they get into a position where they can't pay their bond instalments, says Gerhard Kotzé, MD of the RealNet estate agency group.

"This will no doubt lead to the strongest rental growth that we've seen since 2019, so tenants should be ready to compromise somewhat on their rental wish-list in order to stay within their budget and allow themselves some leeway for future increases.

"After all, while it may feel good to live in an upmarket apartment building or townhouse complex with great security, beautiful views and lots of onsite amenities, it is really not such fun to have to scrimp and save on everything else from food and transport to school fees and retirement savings just to be able to afford the rent."

His advice to those about to start looking for a home to rent is to first work out a realistic budget and commit to it, so that they view and compare only those units that they can comfortably afford, and don't get distracted by those that are beyond their means. "If they are honest about what they can afford, it will also be much easier for our rental agents to assist them to find the right apartments."

Kotzé says it is widely held that rent should equal no more than 30% of a tenant's take-home or after-tax salary, so that they can also cover all their other monthly commitments without financial stress, and hopefully even be able to save something for emergencies and retirement.

"So according to the latest BankservAfrica Take-Home Pay Index, which shows that the average disposable income in May was R14 817, the average SA earner planning to rent a home should currently be budgeting no more than around R4445 per month - and perhaps double that when sharing the rent with a spouse or partner."

This ties in, he says, with the latest PayProp Rental Index (Q1 2022), which shows that the national average rental currently being charged is R7958 - and that a very large percentage of tenants rent for far less than that.

"Average rentals in Gauteng, KwaZulu-Natal and the Western Cape, at R8379, R8381 and R9142 respectively, do tend to be higher than the national average, but being the three most economically active provinces, the average salaries here also tend to be higher than elsewhere.

"Nevertheless, it never hurts for tenants, and especially those new to the rental market, to draw up a list of all their monthly expenses and see what rent they can realistically afford - or if the rent they are currently paying is taking up too much of their disposable income and they should perhaps consider a move to a more affordable apartment."

Kotzé says another important point for young tenants to remember is that they very likely won't live in the same place for ever. "If you're just getting started in your career and moving into your first apartment, you will need to account for some additional expenditures such as utilities, probably some furniture, and several deposits, so it may be a good idea to rent for even less than 30% of your take-home pay, even if you have to sacrifice some of the features on your wish-list.

"You can always move to more upmarket accommodation when you get a promotion and a salary increase, or to celebrate once your new small business starts to grow and prosper.

"And in the meanwhile, you should consider the 'perfect' rental home as the one that is most affordable and secure - because it enables you to live comfortably and to sleep at night instead of lying awake and worrying about how to make ends meet."