Buy-to-let demand soars in Jo'burg
That's the word from Rory O'Hagan, managing principal of Chas Everitt Sandton, Waterfall and Bedfordview, who notes that rising office demand is being accompanied by a spike in demand for rental apartments and estate homes close to workplaces in the main commercial nodes.
'This is being further fuelled by the evolution of many office buildings and precincts into mixed-use environments to make them more attractive as permanent residential options, and rental demand is soaring in areas like Sandton, Rosebank, Bryanston and Waterfall, to the extent that we often don't even have time to advertise our listings in these areas before they are taken up.
'And those we do advertise are attracting major interest. A luxury two-bedroom apartment we recently sold in Dunkeld attracted 30 enquiries in the first week, and another in Riverclub was also sold in a few days after notching up 28 enquiries. Investment buyers we have worked with recently have also been buying one and two-bedroom apartments to let out in Craighall Park, Rosebank and Waterfall.'
He says that in a strong turnaround from the Covid-driven trend which saw city centres empty out as remote working freed both employees and executives to head en masse for coastal and country locations, these tenants and buyers are now returning to urban areas in droves – along with many others who are coming to Gauteng especially, in search of new jobs and business opportunities.
'And this new dynamic has not been lost on investors, both local and foreign, who are literally queuing up to buy apartments, townhouses and clusters suitable for letting in the most sought-after areas. We are getting competing offers on units in the most popular areas and we are also seeing new apartment developments experience rapid sellouts, mostly to investors from Europe and other countries in Africa as well as South Africa.'
The main reasons for the current increases in office demand, O'Hagan says, include the increasing number of large employers (especially in Johannesburg) requiring a full return to the office. Uptake in Cape Town has also been boosted lately, he notes, by the growth of the labour-intensive Business Process Outsourcing (BPO) industry in SA.
'These factors are noted in the latest office market reports from global commercial real estate company Jones Lang LaSalle (JLL), which reveal that more than 400 000sqm of office space was absorbed during the first quarter of this year, mostly in Johannesburg (230 000sqm) and Cape Town (140 000sqm), and that while the national vacancy rate hovers at around 14%, the vacancy rate for prime (P-grade) office space is now only 6%. (See https://www.jll.com/en-us/insights/market-dynamics/south-africa-office and https://www.jll.com/en-us/insights/market-dynamics/johannesburg-office )
'At the same time, a rising number of multinational companies have recently made strategic investments in SA, and others are responding now to the government's new frameworks for public-private partnerships, especially in infrastructure development.
'Owing to its increased international exposure because of the African Continent Free Trade Agreement and the forthcoming G20 Summit, Johannesburg is the current focus of these companies, and this will no doubt create further rental demand for both offices and residences for staff and executives assigned to work on SA projects.'
Meanwhile, says O'Hagan, the most recent StatsSA Household Survey shows that the overall percentage of SA's 19m households that rent rather than buy has increased from 17,7% in 2020 to 23,9%, while the Global Property Guide notes that the gross residential yield in SA has risen from 9,96% in the last quarter of 2024 to 10,36% currently.
(See https://www.globalpropertyguide.com/africa/south-africa/rental-yields#:~:text=The%20average%20gross%20rental%20yield,%25%20(Q2%2C%202025 ).
'These are very positive numbers for buy-to-let investors, especially when one considers that average rental yields in the UK and US, for example, range between 6% and 7%, those in Australia around 5% and those in most of Europe from 4% to 5%.
'SA has also experienced a decline in both the planning and completion of new homes over the past two years that is expected to give rise to a supply shortage and rising rentals going forward.'
(See https://www.statssa.gov.za/publications/P50413/P504132024.pdf)
Issued by Chas Everitt International
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