Landlords and property investors should carefully inspect the local market trends and enlist expert assistance for the best chance of success in the rental market.
Good news for landlords: in the first quarter of 2023, we witnessed the best rental growth in over three years, with a notable 4.2% national increase. While the rental growth hasn't matched the pace of inflation, which stood at 6.8% in April (down from 7.1% in March), there is still reason to celebrate.
The encouraging rental growth trend contrasts sharply with the slight 0.1% downturn experienced in the first quarter of 2021 and surpasses the modest 1.8% rise observed during the equivalent period in 2022. From 2021 and throughout 2022, the rental growth rate has consistently risen, reflecting a resilient market.
- Gauteng continues to record below-average rental growth.
- In contrast, major metro areas like the Western Cape and KZN have exceeded expectations, with a rental growth rate of 5%, slightly higher than the national average.
- The Northern Cape is a particular standout, with an impressive rental rate growth of 10.2% - more than double the national average.
Rental property trends in South Africa: Tenants
Seeff urges landlords and property investors to take note of the following less-than-favourable trends in the South Africa rental property market, as the market’s highs and lows are ever-fluctuating.
- The proportion of their earnings that tenants allocate to rent has increased, going from 28.3% to 28.8%.
- Meanwhile, the percentage of tenants in financial arrears has slightly increased from 18.1% to 18.3%.
- The average debt compared to the average monthly rent has seen an adverse change; however, it's still more favourable than during the pandemic period.
Perhaps the most notable trend is affordability. Affordability significantly influences the demand for rental properties, alongside other factors like relocating to a different region or city or needing temporary housing.
Landlords should take care to price their properties realistically to attract and retain tenants. At the same time, Seeff emphasises the importance of location and appealing features such as solar power and robust security systems to set your property apart from the competition.
Rental Property Trends in South Africa: Growth Rates
The Western Cape continues to hold its crown as the region with the most expensive monthly rentals, commanding an impressive average of R9,872 per month. Elsewhere in the South African rental property market, the North West region offers an economical alternative, showcasing the most pocket-friendly monthly rentals averaging at a modest R5,738.
Regarding rental growth, the Northern Cape holds the top spot among the regions, achieving 10.2% growth. Conversely, the Free State experienced an unexpected downturn, with rents witnessing a 1.1% dip, marking it as the region with the lowest rental growth.
- The Western Cape is the most expensive province, with the highest volume of rentals above R7,500 to R15,000-plus. The province saw an increase of 5% to R9 872.
- In the Northern Cape, rentals are rising, but only 10.7% of rentals achieve upwards of R15,000 per month. The province increased by 10.2% to R9 248.
- KwaZulu-Natal enjoyed a favourable increase of 5% to R8 801, with over 10% of rentals achieving above R15,000 monthly.
- Gauteng boasts a significantly higher number of expensive rentals when compared to the national average. The province increased by 3.1% to R8 641, while 36% of monthly rentals range between R5,000 and R7,500.
- Mpumalanga continues to be one of the more affordable areas for tenants. 34.5% of rental properties fall in the R5,000 to R7,500 monthly range. Overall, the province increased by 5.1% to R8 268.
- Another affordable province, the Eastern Cape, offers a large selection of property rentals below R2,500 per month. The Eastern Cape increased by 4.5% to R6 650 overall.
- The Free State saw a decline of 1.1% to R6 348. Still one of the most affordable provinces, 37.4% of its rentals are between R2,500 and R5,000 monthly.
- More than half of all rentals in the North West fall into the R1,000 to R2,500 bracket as average rental rates rise and the population in the upper rental brackets grow rapidly. North West increased by 3.9% to R5 738.
- Limpopo is another affordable province. The majority of rental property prices are between R5,000 and R7,500 per month, and overall the province increased by 6.5% to R7,657.
As a landlord considering the implications of these property trends in South Africa, you’re not alone. Get in touch for assistance from one of our expert Property Practitioners, who have the expertise and area knowledge to help you navigate rental properties and secure tenants.
Did you know? New apartment developments pose a fantastic rental investment opportunity, and if you’re serious about property investment and wish to expand your portfolio, read our blog on rental property investments.
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