TPN Credit Bureau’s latest vacancy survey reveals increased demand for residential rental property with the number of vacancies dropping to levels last seen in 2017.
Overall, vacancies decreased by 37.61% between 2021 and 2022. This is also taking market adjustment after hard lockdown in 2020 into account. The residential rental market continued to see positive signs of growth in the first quarter of 2023 with the national vacancy rate at 6.19%, down from 8.13% in the fourth quarter of 2022.
According to head of marketing at TPN Credit Bureau Waldo Marcus this trend is expected to continue in 2023, but at a slower pace. “The annual average vacancy rate is declining as consumers opt for more predictable accommodation expenditure,” he says. “The cost of renting with set escalation limitations in terms of repairs and maintenance costs and protection against interest rate fluctuations, provides some sense of predictability for tenants.”
TPN’s Vacancy Survey shows property purchases, on the other hand, have slowed down due to high interest rates and poor consumer confidence. This is reflected in the drop in the number of new building plans being submitted for approval to larger municipalities. Overall, the TPN Rental Market Strength Index improved by 2.68 points in the first quarter of 2023 compared to the fourth quarter of 2022.
“This means demand outweighs the current supply and, with more stock not entering the market in the short term, average annual vacancies should remain below the 6% to 7% mark,” says Marcus.
Demand and supply strength differ in each province with coastal provinces seeing stronger demand. The Western Cape leads with the highest Market Strength Index and the lowest vacancy rate. Given persistently strong demand and a lack of supply, investment is expected to continue here. However, this investment will come at a cost to tenants with escalations expected to accelerate, placing lower income households under greater pressure.
Although KwaZulu-Natal’s supply and demand behaviour is inconsistent, it remains well above the equilibrium mark of 66 points. Perceived supply in the province has dropped while demand has increased. However, despite its healthy rental market strength, vacancies have increased to above 10% which could ultimately slow rental growth.
Growth in the value of new building plans approved in 2021 and 2022 in the Eastern Cape resulted in an improved supply rating. In the first quarter of 2023, the supply rating slowed with vacancies decreasing from their previous highs. One in 10 properties in this province remains vacant. Gauteng continues to struggle with poor market strength. Although the perceived demand in Gauteng remains high, the number of units available is also high.
