Rental costs in South Africa increased across the board in the second quarter of 2022. According to PayProp’s most recent Rental Index, it has been nearly five years since this occurred.
Tenants’ and owners’ financial strains in the aftermath of the pandemic have contributed to the South African rental market’s turbulent two years. The national rental growth rate in 2021 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.
After nearly two years of stagnation, quarterly year-on-year rental growth in South Africa has been positive throughout 2022, with the national average increasing to 2.6% by the end of June. Because of this, tenants will have a difficult time finding the same deals they did a year ago.
According to PayProp, some in the residential rental sector are concerned about an increase in non-payment and lower growth rates in the coming year as South Africa’s rising living costs place additional financial strain on tenants’ pockets.
The trend is clearly rising, as evidenced by the rising slope of the moving average. However, renters’ already tight budgets will be further stretched by rising interest rates and high inflation, prompting some to look elsewhere for housing. According to the most recent PayProp Rental Index, this could halt rental market recovery.
“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,” to paraphrase.
Across all provinces, the Northern Cape and Mpumalanga have seen the greatest increases in rental prices. Mpumalanga’s average rental price increased to R7,870 in the second quarter, the country’s second highest quarterly increase. PayProp stated that because the province has fewer clients, the data is subject to “sharper fluctuations,” but rents in the Northern Cape increased by 9% to R8,626.
Tenant costs increased by 3% in the Western Cape in the second quarter, the largest quarterly increase since the epidemic began. In the second quarter of 2022, the average rent was R9,462.
According to PayProp data, Gauteng had the slowest rental growth of the nine provinces (0.1% decline in the first quarter and 0.3% increase in the second quarter). The province’s average rent in the third quarter of 2018 was R8,319, up from R8,292 the previous year. This figure remains approximately 5% higher than the national average.
The Free State is experiencing the same slow growth, with rental prices rising by less than 2% over the same period in 2021. The province’s average rent in the most recent quarter was R6,328, the second lowest of any province, trailing only the North West, where the average rent was R5,478.
After underperforming the national average for the first four quarters following the announcement of the lockdown, rental prices in KwaZulu-Natal have recently outperformed, rising to 3% in the most recent quarter. The province’s average rent is now R8,443, a significant increase from previous years.
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