Residential vacancy levels in Cape Town soared to 28.8% in the second quarter, new data from TPN shows. This means between one in three and one in four rental units are standing empty. These unprecedented levels have helped push up the province’s (in effect Cape Town and the Winelands) vacancy rate to 14.4%, the first time this has been in double digits.
Michelle Dickens, CEO of the credit bureau, says “the Cape Town story is a double whammy of increased supply caused by converting short-term holiday rentals into long-term lets and work-from-home opportunities, which allow tenants to relocate to the more affordable northern suburbs”.
Given the restrictions on travel by foreigners (in their home countries, not necessarily at our borders), so-called ‘Airbnb demand’ has all but dried up in the city.
Landlords would’ve attempted to shift much of this of this stock to year-long rentals last year already, and this supply overhang persists.
The area defined as ‘Cape Town’ in the bureau’s Q2 Vacancy Survey is effectively the City Bowl – in other words not the Atlantic Seaboard, Northern Suburbs, Southern Suburbs or Winelands.
Vacancy rates on the Atlantic Seaboard have recovered from the 24% spike seen in Q4 to 13.3%, not much worse than the 12.4% in Q3 of last year.
The Northern Suburbs remain the best-performing area in the Cape, with a vacancy rate of just 5%.
This is far below TPN’s reported national average of 13.1%.
In its survey, TPN considers inputs from landlords as well as estate agents. It says landlords have reported a vacancy rate of 14.29%, compared to a rate of 9.87% claimed by estate agents.
Dickens says this “begs the question, did landlords reacted slower to reducing their rent and so bear the bigger brunt of overall vacancies?”
Landlords also have a more pessimistic view of the market, with a demand rating of 51.5 (barely above 50) and a supply rating of 73.32 (pointing to an overstocked market). Overall, TPN reports a demand rating of 53 for Q2, with a supply rating of 68.76.
In Gauteng, the largest market (with 47% of all tenants), TPN’s demand rating has dropped below 50 (to 48.15), while the supply rating is at a very high 73.90.
Vacancy rates in the province did, however, recover from 13.8% in Q1 to 12.4% in Q2.
Source: TPN Vacancy Survey Q2
Sandton remains an outlier, with an eye-popping vacancy rate of 26.7%. This is significantly higher than the 22.4% reported in Q4 of last year.
Dickens says this “remains a concern”, noting the impact of office-to-residential conversions “with large lease-up portfolios of quality new units with enticing incentives putting pressure on this area”.
Vacancy rates in most markets within Gauteng are in double-digit territory, with rates elevated in Midrand (20.2%), Soweto (16.6%), Johannesburg (14.6%), Randburg (14.3%) and the West Rand (13.8%). Two markets – Ekurhuleni (9.1%) and Tshwane (9%) – are just under 10%, while Centurion is currently the best-performing with a vacancy rate of 4.8%.
TPN says even though the demand rating in KwaZulu-Natal has “diminished over time”, it “still supports sufficient demand for supply available”.
On the north coast, however, vacancies have more than doubled since Q4 to 17.2%.
There is a significant amount of new stock coming on stream in the Ballito area. Vacancies in eThekwini (Durban) are 10.5%, and 4.2% in Pietermaritzburg.
|Area||Vacancy Q3 2020||Vacancy Q4 2020||Vacancy Q2 2021|
|North Coast (KZN)||7.5%||7.4%||17.2%|
|Southern Suburbs (CT)||13.4%||15.2%||12.9%|
|Northern Suburbs (CT)||6.6%||5.1%||5%|
* TPN did not publish a Q1 Vacancy Survey for 2021.
Dickens says “it’s a tenant’s market, an oversupply of vacant properties is driving down rental prices as tenants are in the position to shop around for a better deal”.
She adds: “Price sensitivity is a critical consideration and remains the most important aspect for a tenant, followed closely by security and then distance to work, schools and shops.”