Rental growth cooled in Q4, says new PayProp Rental Index

Rental growth is starting to cool, according to the latest PayProp Rental Index. But with investor confidence still high and real-terms rental growth holding for now, rental agents have opportunities to continue growing their businesses if they adapt early.

2025 was the strongest year for residential rental growth in the 2020s, with rents rising in real terms throughout the year and tenant arrears remaining close to record lows.  

However, year-on-year (YoY) rental growth eased to 4.5% in the fourth quarter of 2025, down from 4.9% in Q3, as higher living costs, rising municipal charges and modest salary growth continued to squeeze household finances.  

Nationally, the average rent reached R9 462, an increase of R411 compared to the same period last year.

“Growth is clearly cooling after a strong run, but on the surface the rental market still began the year in good health,” says Michelle Dickens from PayProp. “Many tenants are also continuing to manage their rental commitments well, but ongoing pressure on household budgets means landlords and agents may need to take a more measured approach to rent increases.”

Provincial markets diverge – and a 2025 star stumbles

Rental performance varied widely across the country during the quarter.

The Western Cape remains by far the most expensive rental market in South Africa, with average rent rising to R11 894 and annual growth reaching 6.8%.  

At the other end of the spectrum, Mpumalanga recorded the weakest growth at just 1.5% YoY. However, this marked a welcome recovery from the negative growth seen in the province in the previous quarter.

North West emerged as the country’s fastest-growing rental market in Q4, with rents increasing by 11.2% YoY. The Northern Cape also recorded strong performance, posting 7.6% growth. But in Limpopo, which was one of SA’s top performers in the four previous quarters, YoY rental growth fell dramatically from 10.9% in Q3 to 5.1%.

Meanwhile, South Africa’s largest rental markets continued to show more modest increases. Gauteng recorded rental growth of 3.2%, while KwaZulu-Natal grew by 3.4%. These two provinces, plus Limpopo, continue to elbow for third place on SA’s rental pricing leaderboard.

Arrears near their lowest ever

Despite affordability pressures, tenant payment behaviour remained remarkably resilient.

Tenant arrears eased in Q4, with 17% of renters behind on payments – a slight improvement from 17.2% in Q3 and just 0.1 percentage points above the lowest level ever recorded.  

Tenants who did fall into arrears owed less than ever before. The average arrears balance dropped to 71.3% of monthly rent, marking a new record low in the PayProp Rental Index.

“Low arrears levels show that the rental market remains surprisingly stable,” says Dickens. “Agents’ continued focus on careful tenant vetting and proactive management is helping landlords maintain reliable rental income even as economic conditions remain challenging.”

What’s next?

After a strong performance throughout the year, the moderation in rental growth toward the end of 2025 suggests South Africa’s rental market may be entering a period of stabilisation.

At the same time, rental growth is increasingly tracking inflation. And while low arrears confirm that agents are effectively safeguarding their landlords’ returns, rising affordability pressures cannot be ignored. In this environment, agents will need to check affordability carefully when selecting tenants or renewing tenancies.

“The fundamentals of the rental market remain strong,” says Dickens. “But with underlying pressure on tenants, agents who can rely on accurate market data and careful tenant selection tools and processes will be best placed to maintain sustainable rental growth in 2026.