How to set a fair rental price
RE/MAX Southern Africa shares advice on pricing your rent better in a tight economy.
High interest rates have driven activity away from homeownership and back to the rental market. While this can be good news for landlords, they must still use caution when setting the right rental price.
According to the PayProp quarterly Rental Index for Q2 2023, “In pure pricing terms, the national average rent for this quarter was R8 375, up 4.4% from R8 032 in Q2 2022.”
However, the report also states that “the national percentage of tenants in arrears ticked up slightly this quarter, from 18.0% to 18.4%.”
Adrian Goslett, the regional director and CEO of RE/MAX of Southern Africa, said landlords must set a fair rental price to attract and retain reliable tenants.
“While the demand for rental homes remains high across SA, landlords still need to secure a reliable tenant to avoid the risk of missed or late payments. If a rental price is too high, it is likely to deter sensible tenants and could put landlords at risk of signing a lease with a tenant who actually cannot truly afford the rent,” Goslett cautioned.
He reminded landlords that the current economic climate has left most consumers feeling pinched.
“Apart from inflation eating into monthly budgets, debt payments, such as credit cards or car loans, have become more expensive with every interest rate hike. This situation leaves possible tenants with less disposable income to spend on things like rent,” he commented.
To get the rental price right, Goslett advised landlords to rely on the advice of a reputable rental agent.
“Based on a rental agent’s research and comparative market analysis, they can set a competitive rental price. This should be in line with the market and the broader economic conditions but should also reflect the unique features and condition of a property,” said Goslett.
Location is one of the most significant factors affecting rental prices. The higher the demand for an area, the higher the landlord can charge for rent. Properties near good schools or popular restaurants can typically command higher rents.
Goslett said the size and features of your property, such as the number of bedrooms and bathrooms, square footage, and amenities like a pool, gym, or covered parking, will also affect the rental price.
“Larger homes with more amenities generally warrant higher rentals. Keeping an eye on what other rental homes in your area offer should also inform your pricing strategy.”
As a final word of advice, Goslett reminded landlords that finding the right rental price was a balance between attracting reliable tenants and maximising your rental income.
“It is essential to stay informed about the local real estate market and adapt your pricing strategy to reflect the current conditions. Working closely with a real estate professional will be crucial to maximise your potential earnings,” he concluded.
