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It’s exciting times for property owners who are unlocking the benefits of the nationwide rental uptick.
The rental growth in SA has reached its highest level since the final quarter of 2017. PayProp’s most recent Rental Index shows that rental growth reached 4.4% in both April and May, followed by 4.2% in June 2023. The average national rent figure now stands at R8,375 per month.
PayProp’s head of data analytics Johette Smuts says that for the first time since before the pandemic, residential rental growth is approaching the rate of consumer price inflation. Interest rates may now have reached their peak following the South Africa Reserve Bank’s decision to hold them steady last month, and this places the rental industry on the brink of its first real-term gains in some time.
Rentals on the up across the country
All provinces posted positive growth in Q2 with the majority falling within a percentage point of the 4.4% national average. SA’s wealthiest province, Gauteng, showed year on year rental growth of 4.5%, taking the average rent in the province to R8,691 in Q2. This is a particularly strong performance after a sluggish first quarter when Gauteng posted the second slowest rental growth at just 3.1%.
The Western Cape remains SA’s most expensive province for rental property despite a weaker performance in terms of growth this quarter. Average rents reached R9,730 in Q2 from R9,462 a year earlier, but year on year growth was just 2.8% – the second lowest in the country and well below the 5.0% set last quarter.
KwaZulu-Natal recorded 4.4% growth in the quarter, putting it right on the national average. However, this is a slowdown compared to Q1’s 5.0%. KZN remains South Africa’s third most expensive province in which to rent with an average monthly rent of R8,817.
In terms of rental pricing, Mpumalanga is SA’smost average province with tenants paying R8,281 this quarter. Rents in the province are less than R100 from the national average of R8,375 after a solid rental growth rate of 5.2% this quarter.
Rental growth in the Northern Cape slowed slightly from 10.2% in Q1 to 6.8% in Q2. The province experienced the biggest average rental increase in cash terms at R590 year on year, from R8,626 to R9,216.
Room for growth
While rentals have improved, data taken from credit checks on rental applicants shows that tenants’ incomes have outpaced rents across most income brackets – and even beaten inflation. Previously, analysts have warned that affordability pressures on tenants could stifle rental growth, but according to PayProp that hasn’t been the case so far despite a slight increase in arrears.
“With rents and incomes rising and inflation falling, Q2 brought good news for landlords, tenants and rental agents,” says Smuts. “The residential rental sector has endured challenging conditions over the last few years and it’s encouraging to be able to report on sustained, positive rental growth.”
