Rental prices increased in all South African provinces in the second quarter of 2022. According to the most recent PayProp Rental Index, the last time this happened was nearly five years ago.
The rental market in South Africa has had a turbulent two years, owing largely to pandemic-induced financial pressures on both tenants and landlords. In 2021, the national rental growth rate was held to less than 1% in each quarter compared to the previous year, whereas pre-pandemic increases were closer to 4% in each three-month period.
South African landlords will be relieved to learn that, following nearly two years of stagnation, quarterly year-on-year rental growth has been positive throughout 2022, with the national average rising to 2.6% at the end of June. This also means that tenants will be hard pressed to find the same discounts they did a year ago.
However, with rising living costs in South Africa putting additional financial strain on tenants’ pockets, some in the residential rental sector are concerned about an increase in non-payment and lower growth rates in the coming year, according to PayProp.
“The moving average trendline clearly indicates an upward trend. High levels of inflation and rising interest rates, on the other hand, will continue to put strain on tenants’ already stretched finances, potentially forcing some to seek cheaper housing. This could prevent the rental market from recovering further “according to the most recent PayProp Rental Index
“However, higher interest rates and a reduced ability to save may lead to some higher-income tenants continuing to rent rather than purchasing their own homes, which would have the opposite effect.”
Rentals in some provinces have increased faster than others, with Northern Cape and Mpumalanga properties leading the charge. Rentals in Mpumalanga increased by 5.2% in the second quarter, the second highest rate in the country, to an average of R7,870. Rents in the Northern Cape increased by 9% to R8,626, though PayProp acknowledged that because the province has fewer clients, this data is subject to “sharper fluctuations.”
The Western Cape, which saw a 3% increase in the second quarter, the highest since the beginning of the pandemic, remains South Africa’s most expensive province for tenants. In the second quarter of 2022, the average rent was R9,462.
According to PayProp data, Gauteng rental growth was the slowest of the nine provinces, with a 0.1% decline in the first quarter and a meagre 0.3% increase in the second quarter. The province’s average rent increased to R8,319, up from R8,292 in the same quarter last year, and remains about 5% higher than the national average.
The Free State has also seen slow growth, with rentals increasing by less than 2% compared to the same period in 2021. During the most recent quarter, the province’s average rent was R6,328, the second lowest of any province, trailing only the North West, where the average rent was R5,478.
Rentals in KwaZulu-Natal, which experienced negative year-on-year rental growth during the first four quarters following the announcement of the lockdown, have recently outperformed the national average, increasing to 3% in the most recent quarter. The province’s average rent has risen to R8,443.
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