South Africa

PayProp Rental Index – growth accelerates for eighth quarter

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The cover and inside view of the PayProp Rental Index Q3 2023

The average SA residential rent grew 4.6% year on year in Q3 2023, according to the new PayProp Rental Index – the highest recorded since 2017.

This is a 0.2% rise from Q2, meaning growth has now risen for eight consecutive quarters. The average rent in South Africa is now R8 451, R368 more than a year previously.

Unlike previous quarters, inflation was stable in Q3 as well. Consumer price increases stayed within the SA Reserve Bank’s 3%-6% target throughout, meaning landlords and rental agents saw a bigger real-terms benefit from rental growth.

The provincial picture

For a second quarter in a row, all provinces experienced positive rental growth – but some more than others.

The quarter’s fastest growth came from the North West, where rents surged 9.3% year on year. Tenants there still get away with the lowest rents in the country, but their monthly accommodation cost has passed R6 000 for the first time, hitting R6 021.

At the other end of the scale is the Free State, where rents grew by just 1.9%. Nonetheless, this should be welcome news for local landlords as it hints at a recovery in the province. Year-on-year growth in Q2 was 0.9%, and rents fell in the three previous quarters. The average rent now stands at R6 403.

Two provinces recorded slower rental growth in Q3 than in Q2. In the Northern Cape, growth dropped from 6.8% to 6.2% – still comfortably above the national average, but pushing it into third place behind the North West and Mpumalanga.

Meanwhile, rental growth in KwaZulu-Natal dropped to 2.5% from 4.4% last quarter – the second lowest in Q3. This slowing growth means KZN has fallen out of the top three on the growth table. Rents there were R8 749 on average, behind the Western Cape, Northern Cape, and now Gauteng.

What to look out for in Q4 – and beyond

Rental growth in South Africa is underpinned by high demand for properties, in turn supported by high interest rates putting off first-time buyers. Demand could soften once interest rates fall from their current highs, but for now SARB is staying the course.

The other major factor that could slow rental growth is tenant affordability. As the Rental Index shows, South Africans have budgeted wisely and kept paying their rent despite financial pressures. But with a rising share of income spent on rent and debt, rents could hit an affordability ceiling.

As always, PayProp will report on these trends in the Rental Index to keep you ahead of the curve.

For more rental market data including the latest arrears statistics, tenant spending metrics and more, download your free copy of the PayProp Rental Index Q3 2023.

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