South Africa

Rental growth falls for the first time since 2021

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The cover of the PayProp Rental Index Q1 2024

South Africa’s post-pandemic recovery in residential rental growth is over, but that doesn’t mean disaster for the industry.

Data from the latest PayProp Rental Index shows that rental price growth fell by 0.8% year on year in Q1 2024 compared to Q4 2023, from 4.6% to 3.8%. While that’s faster than in any comparable period in 2022, it’s also the biggest quarter-on-quarter drop since 2020.

And the market is likely to get worse before it gets better – year-on-year growth fell in every month of the quarter, dropping to 3.6% in March. High interest rates and persistently high inflation have reduced tenant affordability, giving landlords and agents little room to increase rents, while arrears are going up.

But according to Johette Smuts, Head of Data Analytics at PayProp SA, agents will manage.

“Rental agents have dealt with much lower rental growth in recent years. Quarterly rental growth has fallen since last year but is still higher than at any time during 2021 or 2022,” says Smuts. “The same resilience that served rental agencies well during the pandemic will help them through the challenges of today.”

She adds that, while rental growth is down, building consistent income from managed rentals remains agencies preferred and best profitability strategy in 2024’s sluggish sales market.

Provincial growth – meet the outliers

Two provinces enjoyed faster rental growth in Q1 2024 than in Q4 2023. In the Free State this figure reached 9.1%, continuing a remarkable streak in the province. And in the Western Cape, growth ticked up from 3.8% in Q4 2023 to 4.3% in Q1 2024. The province still has the most expensive rents in the country at an average of R10 300 – more than R1 000 ahead of the runner-up, the Northern Cape.

Rents in the North West grew 9.8% year on year in Q1. This wasn’t quite the double digit growth achieved by the province in the previous quarter, but it still beat out every other province over the period.

At the other end of the scale, rents in KwaZulu-Natal fell 0.4% year on year, making it the first province to post negative rental growth since Q1 2023. The Northern Cape barely managed to stay in positive territory, returning rental growth of just 0.4% – a surprise drop after it recorded above-average growth throughout 2023 and most of 2022.

For more rental market statistics and analysis, including national and provincial arrears, spending metrics and more, download the full PayProp Rental Index Q1 2024.

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