Guaranteed rental income make their way to South Africa 

A while ago, we wrote about rental guarantees, and how well they work for off plan purchases and how big they were in the United Kingdom.

At that time, Rawson Developers, were one of a handful of developers offering guaranteed rental income in South Africa, as part of their Newlands Peak development in Cape Town. Since then, the local property market has been aflush with several developers jumping on the bandwagon and offering the same guarantee, if not better.

Luring the landlord

One of the main reasons this has become a trend is because our record high interest rates has resulted in a depressed property market with investors and buyers naturally hesitant to commit to big financial commitments.

A rental guarantee reduces this risk and as more enter the market it increases the competition and choice. Renprop for example has been offering its investors a guaranteed rental income since 2021, with its managing director Chris Renecle explaining that the rates are typically set between 6 to 12 months, depending on the value of the property.

Ryan Joffe Properties and Narrative, the developers behind The Rockefeller outdid them by instead offering a game-changing four-year rental income guarantee. Investors that bought into an apartment at the lavish, hotel-style development on the Cape Town Foreshore were promised a 7% net return guaranteed over the four years, which could be used to cover bond payments or reinvested elsewhere.

Selling the lifestyle

Another reason why rental guarantees work so well in the residential estate space is because there is so much to entice both the tenant and the investor. At the newly launched Devonbosch Estate in Stellenbosch for example, developers SquareTurn Developments (a South African subsidiary of the Belgium based SquareGroup company) will be creating a European-inspired development comprising a Piazza and selection of one, two and three-bedroom designer apartments.

Safety will be a priority at the Piazza with planned 24-hour patrolling and it will also be home to business, retail, residential and some of the most exciting adventure attractions, including the winelands’ first-ever surfing without wind creation called e-foiling and the greatest of all time (GOAT) mountain bike trail.

‘We believe it’s simply a no-brainer for investors to want to buy into one of our 38 designer apartments that have a management solution that will take care of investors’ rental requirements. This solution will ensure that investors are paid a rental income, from month to month, that exceeds the market related area rental prices by up to 25%, thereby guaranteeing a net rental yield of up to 7.7% after levies have been deducted,’ adds Jean Pierre Nortier, CEO of SquareTurn Property Developers.