South Africa

Will semigration reshape provincial rental markets?

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The back of a moving van filled with boxes

Semigration has been a key trend in the South African real estate industry since the COVID pandemic, when city-dwellers with remote jobs headed for rural and coastal areas. What effect is it having on provincial rental markets, and could the high barriers to buying a new property put people off long-distance moves?

The arrival of new residents could give a boost to rental markets in the destination provinces. Data shows that people moving across the country are mostly of working age and in search of better economic opportunities, and they’re likely to rent while they find their feet.

Three provinces stand out as semigration destinations: the Western Cape, Gauteng and KwaZulu-Natal. According to the most recent PayProp Rental Index (PRI), these are already three of the four most expensive provinces for renters.

In turn, cheaper provinces could see slower rental growth as potential renters pack up and leave. However, that’s not inevitable. The North West – the cheapest province for renters, according to the PRI – has also welcomed a lot of new arrivals, in part because of its affordable housing.

But to date, any effect on rental growth has been limited. According to the Q1 2023 PRI, the strongest rental growth took place in the Northern Cape and Limpopo even though both provinces have experienced below-average population growth, suggesting other reasons behind their strong performances.

Will rising interest rates slow down semigration?

The rise in interest rates has put off some homebuyers, but so far it hasn’t deterred people from moving to the Western Cape, according to Samuel Seeff, chairman of Seeff Property Group. People are moving to areas like Cape Town because of its thriving job market and good municipal services, not because they expect inexpensive housing.

Seeff adds that the migration to the Cape could slow down if prospective movers can’t sell their houses elsewhere as easily. But for tenants moving from one rented property to another, that’s not a factor, meaning that residential rental demand could still have more resilience than sales.

And if South Africa’s cost of living increases keep coming, more people could decide that the best way to beat the squeeze is to get a higher-paying job in Gauteng or the Western Cape.

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