Cape Town takes second spot with growth of 17,5% to an average of R1864. Johannesburg shows a low growth of 5,6% to R1742, and Bloemfontein recorded growth of 8,2% to R1101.

Pretoria, Cape Town and Bloemfontein were the only three cities which showed growth above the consumer price index of 5,9% and the bureau for economic research building consumer index of 9,3%.

The report says rentals for flats in Pretoria have been on the rise since 1996 and have picked up speed since last year. It attributes this to a shortage of stock, intensified by the increase in demand from salaried civil servants wanting to live close to their place of work, and students attending Pretoria University.

Pretoria provides an excellent example of how to manage a demographic shift in tenant mix, says the report. This contrasts with events in Johannesburg, where the demographic shift in places like Hillbrow has changed many flat buildings into slums.

The report says the apparent reasons for Pretoria's success is careful management of the apartment blocks and the fact that the new tenants are middle class and salaried.

It suggests that 'the sideways movement' in rentals in Johannesburg and Durban could be the result of a slower regional growth rate.

However, all indications are that the Johannesburg economy is now outperforming Cape Town's. This puts a question mark behind Cape Town's continued 'super' rentals performance.

Trafalgar Property & Financial Services CEO Neville Schaefer says Johannesburg flats remain the best residential investment buy, despite the fact that rentals in Cape Town and Pretoria are currently racing ahead at breakneck speed. He says Johannesburg's growing economy will continue to drive demand.

The Rode report says apartment rentals in Port Elizabeth reached their nadir in the beginning of 1999 and have been moving 'sideways' over the past few quarters.

Business Day