How a data-led approach can overcome rising upfront tenant application costs

Somewhat surprisingly, the rising upfront cost of renting is promoting stable, long-term tenancies, says Michelle Dickens from PayProp, but agents will need to adapt to this shift in the market.

According to the latest PayProp Rental Index for Q3 2025, rising rents and costs are pushing up initial payments such as damage deposits. While the average damage deposit ratio has remained stable at 1.31 times monthly rent, ongoing rental growth means the average deposit now amounts to over R12 000 in cash terms.

Beyond deposits, tenants don’t seem under extra financial pressure during their tenancies: the share of tenants in arrears fell to new record lows in 2025, as did the percentage of rent that tenants in arrears owe.  

However, bigger deposits may be encouraging more tenants to stay in their current homes for longer. When they do move, most are looking to move to more affordable homes, according to PayProp’s annual State of the Rental Industry Survey.  

Dickens says if tenants move less often, the services agencies offer within a tenancy will become more important to landlords, especially around lease renewal.  

“Long-term tenancies are an opportunity for agents, not a roadblock to charging new fees. Reducing void periods is good for both landlords and agents, and when agents are diligent about reassessing affordability and carrying out interim inspections at lease renewal, longer tenancies can yield additional income for value-add and lower the risk of arrears.”

She adds that incentivising more stable, long-term tenancies may be good for tenants and landlords in other ways too. Finding a tenant and setting up a lease is the most expensive part of the rental process for the agent, meaning the cost of a tenancy renewal can be less for the landlord than the cost of placing a new tenant. Meanwhile, tenants don’t have to undertake the hassle of moving.

Dickens emphasises the need to recover the ongoing costs of managing a potentially longer tenancy through in-tenancy fees, like renewal and interim inspection fees, as well as upfront procurement fees.  

For agencies that mainly work with landlords on a procurement-only basis, however, any shift towards longer tenancies may be difficult. The answer is to prioritise fully-managed rentals, enabling agents to withstand changes in market conditions.

How much do tenants pay upfront?

Nationally, the average damage deposit ratio to rent has been stable, but in provinces with higher rental prices, this translates into a substantial upfront cash requirement for tenants before they even move in.

The Western Cape, which continues to command the highest rents in the country, illustrates this trend strikingly. With an average monthly rent of R11,635 and a damage deposit ratio of approximately 1.69 times that amount, tenants can expect to pay more than R31,000 upfront when the deposit and first month’s rent are combined. This marks an increase of R1 211 in average damage deposit terms over the same period last year, while the average rent was up R760.

Additional costs such as application fees, lease initiation fees and incoming inspection fees further increase the amount required to secure a property – although not all agencies charge all of these. According to last year’s PayProp State of the Rental Industry Survey, a typical initial lease fee was between R750 and R1 249, while application fees were normally around R500.

Rethinking affordability beyond monthly rent

Rental agents have the crucial job of navigating complex affordability dynamics, balancing landlords’ protection with tenants’ sustainable tenure while also building sustainable businesses. Using market data to set appropriate deposit levels, assess affordability holistically, manage renewals proactively, and develop appropriate fee structures can help to reduce risk on all sides of the lease.

“Agents who understand the full affordability picture in their local market, and who reassess affordability and carry out interim inspections at lease renewal, are in the best position to support stable long-term tenancies,” says Dickens. “As upfront costs rise, the data demonstrates why fully-managed rentals and in-tenancy services are more important than ever for landlords and agents.”