The past year was relatively good for the residential rental market, with rents trending higher, and according to various rental property barometers landlords finally enjoyed positive rental income growth.
With the interest rate cuts bringing vital relief to household budgets in the latter part of last year, it seems that fewer tenants are in arrears. PayProp data for the last quarter of 2024 shows that only around 17.1% of tenants were in arrears. That said, tenants are still spending about 44.1% of their income on rent, largely due to low income growth and the impact of the high interest rates.
The average national monthly rental has also now broken through the R9,000 per month barrier as at the last quarter of 2024. This is significant and indicative of the strong demand for rental property, but also adds to the challenges for tenants.
Rental income growth stood at 5.2% for the last quarter of 2024. This is significantly higher compared to the average house price growth which ended at around 0.8% for the 2024-year, which is well below the growth recorded two years prior to the interest rate hiking cycle.
Rental growth rates did, however, taper down as the year progressed. For example, where the Eastern Cape enjoyed growth of 7.3% in 2023, it fell to just 4% at the end of 2024. Rental growth for the Free State reduced from 9.1% in the first quarter of 2024 to just 3.5% by the end of the year.
As for Mpumalanga, after growing at above average rates in 2023, rents experienced mostly weak growth throughout last year, ending on just 0.2% growth by the end of the year. The Northern Cape also experienced mostly poor growth, and although it recovered slightly, still ended on just 2.6% in the last quarter, well below the national average growth.
After KZN rents declined in the early part of last year, it recovered and ended with growth of 4.5% by the end of the year which is good news for landlords. Gauteng rents also improved despite ending on only 3.4% for 2024 which is below the national average.
North West, with growth of 7.2% in the last quarter, and Limpopo, with significant growth of 11.1% outperformed the national average by a notable margin.
The average rentals differ between the regions with the Western Cape remaining the most expensive, and the North West being the most affordable province for tenants. KZN and Gauteng are also still more affordable compared to the Western Cape.
The average monthly rents per province ranked from most affordable to most expensive, are as follows:
North West - R6 798
Free State - R7 216
Eastern Cape - R7 297
Mpumalanga - R8 439
Limpopo - R8 797
KwaZulu-Natal - R9 147
Gauteng - R9 169
Northern Cape - R9 657
Western Cape - R11 141
Factors which will impact the rental market this year include the economic performance as well as the interest rate. If both improve, as expected, landlords can likely look forward to another good year.
Given the continued cost of living pressure on households, TPN reports that it seems that tenants are increasingly prioritising value for money, seeking smaller, more efficient units in well-located areas.
The sustained influx of people to the metros in search of better economic opportunities is expected to continue fuelling demand for rental accommodation. Additionally, semigration trends to coastal areas, the Cape in particular, will likely continue to drive higher demand and higher average rentals in the Western Cape.
Insofar as rental escalations are concerned, landlords are cautioned to remain mindful of the economic pressures, and to guard against expectations which are out of step with the market. Raising rents above the average rates may result in increased vacancy rates. Increases are therefore likely to remain fairly moderate this year, but could pick up further on the back of an improved interest rate and economic outlook.
Finally, the importance of tenant screening and risk management remains vital. Seeff’s rental agents note that working with a credible rental agency, whether to source a tenant, or manage your rental property, is a definite advantage in the current market. By doing so, landlords can mitigate risk and maintain a stable rental income stream.
Author: Gina Meintjes, 14 March 2025, Rentals
