Buy-to-let home buying is stabilising, although at lower levels, according to the latest FNB Estate Agent Survey for the second quarter of 2019.
During the second quarter it is estimated that about 6.8% of sales were buy-to-let properties - about the same as in the first quarter, but significantly lower than the 9.7% of sales in the second quarter of 2017.
At the same time, while it seems that there has been a steady recovery in buy-to-let sales in coastal regions over the past 12 months, there has been a continued decline in inland regions.
The Cape Town and Durban housing markets have shown the strongest buy-to-let estimates in the first half of 2019, averaging 10.6% and 10.1% of total home buying respectively, according to FNB economist Siphamandla Mkhwanazi.
"We suspect that pent-up demand in Cape Town may have been catalysed by the recent price decline in the higher-end segments, which would have presented attractive buying opportunities for investor-buyers," says Mkhwanazi.
"Furthermore, new developments on the North Coast could have supported buy-to-let demand in Durban in the last few quarters."
Second-quarter estimates for Johannesburg and Pretoria came in at 4.8% and 5.2% of total sales respectively.
According to Mkhwanazi, broadly speaking, the recent weakness in the buy-to-let market could be attributed to the slow house price growth in recent years, thus limiting prospects for capital growth. At the same time relatively low rental escalations limits yield prospects and weak economic growth weighs on potential rental demand growth.
"Nonetheless, the improvements in purchasing activity in some upper-end segments and coastal regions suggest that price incentives are beginning to outweigh these ailments," says Mkhwanazi.
According to Stats SA, data rental inflation has trended down over the past year or so, recording just 4.0% y/y in the first quarter of 2019 - therefore below inflation.
"Estimations of flat vacancies continue to show a rising trend amid strong growth in the supply of new flats and townhouses," says Mkhwanazi.
"Capital growth has also not given much in the first half of the year. This signals some level of pressure in the property market."