PayProp Rental Index: Rental growth outpaces inflation as Western Cape sets the pace

South Africa's residential rental market recorded its strongest quarterly growth in more than a year in Q2 2026. But while landlords benefited from faster rental growth, rising inflation narrowed real-terms gains and provincial performance varied significantly across the country.

According to the latest PayProp Rental Index, national rental growth accelerated to 5.2% year on year (YoY) in Q2, up from 4.8% in the previous quarter and the strongest growth recorded since early 2025. The average South African rent climbed to a new high of R9 715, an increase of R497 compared to a year ago.  

Growth strengthened throughout the quarter, rising from 4.7% in April to 5.6% in June.

But although rental growth accelerated during Q2, inflation also increased steadily through the quarter, reaching 5.0% in June.  

While rents continued to outpace inflation, real terms margins were the smallest recorded since Q3 2024. This means that landlords may be experiencing less benefit from rising rents as property ownership and maintenance costs also increase.  

Western Cape pulls further ahead

The Western Cape was the standout performer in Q2, recording rental growth of 9.7% YoY, its strongest result since Q4 2024. Average rent in the province climbed to R12 561, more than R1 100 higher than a year ago.

The province now commands a substantial premium over the rest of the country. At nearly R2 000 more per month than the Northern Cape, South Africa's second most expensive rental market, the Western Cape continues to widen the gap between itself and other provinces.  

Its strong performance also had a significant impact on the national result. While national rental growth accelerated, seven of South Africa's nine provinces still recorded growth below the national average during the quarter. Excluding the Western Cape from the calculation would reduce national rental growth to just 4.3%, below inflation.  

Outside the Western Cape, the North West was the only province to outperform the national average, with rents increasing by 7.8% YoY.

Meanwhile, Mpumalanga remained South Africa's slowest-growing rental market with growth of just 2.3%, although this represented an improvement from the previous quarter.

Arrears edge up from record lows

Tenant payment performance remained good nationally, although arrears increased slightly from the record low recorded in Q1.

During Q2, 16.9% of tenants were behind on their rent, compared to 16.7% in the previous quarter. Even with this increase, arrears remain at the joint-second lowest level ever recorded by the PayProp Rental Index.  

However, pressure on household finances could increase later in the year. Recent interest rate increases will raise tenants’ debt spending, and this tends to affect arrears six to nine months downstream. We may see further rises in arrears around the end of the year.

What happens next?

Q2 delivered the strongest rental growth in over a year, but the underlying picture is more complex than the national headline suggests.

The Western Cape continues to outperform the rest of the country, inflation is eroding real rental gains, and early signs of pressure on tenant finances are beginning to emerge. While arrears remain near record lows, rental professionals should continue monitoring affordability and payment behaviour closely as the year progresses.