Bad news for people who rent in South Africa

Recent data from PayProp's latest quarterly Rental Index showed that rents across the country have increased by 2.9% over the third quarter of this year compared to the previous year.

The average national rent increased from R7,800 in Q3 2021 to R8,023 in Q3 2022, making it the first quarter in which this figure broke through the R8,000 mark.

Johette Smuts, the head of data analytics at PayProp, said that while rental growth has certainly recovered from the lows of 2020 through 2021, it still lags behind the increases seen in 2019 and before.

"In Q3 2022, the average national rent grew by 3.0%, 3.1% and 2.6% year-on-year in July, August and September, respectively, compared to 3.7%, 3.5% and 4.2% for July, August and September 2019."

Inflation also increased during the quarter, measuring 7.8%, 7.6% and 7.6% in those months, respectively.

Smut said that it is difficult to predict how far the rental market will recover since the pandemic; however, higher interest rates and bond repayments are very likely incentivising tenants to rent for longer, thereby increasing the demand for rental properties and ultimately pushing prices up.

Smuts added that tenants are also becoming more reliable at paying their rent. According to PayProp, tenant arrears improved steadily on a national level in the third quarter, with the average arrears percentage dipping below pre-pandemic levels for the first time during Q3.

"We aren't completely out of the woods yet," she said: "While rising interest rates may increase the demand for rentals, they also slow down economic growth, which puts further pressure on tenants' finances and ultimately negatively impacts their ability to afford higher rental price increases."

PayProp brokedown the average cost of monthly rent across the country:

Note: All increases are in terms of YoY comparison between Q3 in 2021 and Q3 this year.

National 

• Change: (+2.9% / R223)
• Average: R8,023

According to PayProp, in cash terms, the increase to R8,023 marks the highest that rent has ever been, breaking the R8,000 ceiling.

Eastern Cape

• Change: (+4% / R250)
• Average: R6,467

"Having overtaken the Free State, the average rent in this province is now the third lowest in the country," said PayProp.

Free State

• Change: (-0.2% / R14)
• Average: R6,281

The Free State, as an outlier, was the only province to experience negative rental growth. Free State rent is now the second lowest in the country, after an increase in the Eastern Cape.

Gauteng

• Change: (+1.8% / R147)
• Average: R8,383

South Africa's economic hub has reported a slight increase in rental costs, the second lowest increase just behind the Free State and far off the national average of 2.9%.

"This time last year, Gauteng was the second most expensive province
in which to rent, but it has since been overtaken by both KwaZulu-Natal and the Northern Cape," said Smuts.

KwaZulu - Natal

• Change: (+3.7% / R305)
• Average: R8,537

As the third most expensive province to rent in, KwaZulu-Natal reported a sizable increase above the national average.

Limpopo

• Change: (+4.7% / R330)
• Average: R7,354

A 4.7% increase puts Limpopo R700 below the national average despite its strong rental growth. Smuts said the province can be expected to catch up the others.

Mpumalanga

• Change: (+2.6% /  R198)
• Average: R7,897

The 2.6% increase seen in Mpumalanga was just shy of the national average.

North West

• Change: (+4.8% / R252)
• Average: R5,509

"Even though the North West experienced the second-highest rental growth rate out of all the provinces in Q3, it still has the lowest average rent in the country," said Smuts.

The low average rent, according to PayProp, is due to the fact that a large proportion of its property portfolio for the province is student accommodation.

Northern Cape

• Change: (+8.1% / R652)
• Average: R8,721

The Northern Cape recorded the highest rental growth out of all the provinces in South Africa. As a result of this, rents increased by R652, and the province overtook Gauteng and KwaZulu-Natal to become second-most expensive in the country, she added.

Western Cape

• Change: (2.9% / R268)
• Average: R9,533

The province, home to the Mother City, continues to have the highest rent in all of the countries, with an average of more than R1,500 above the national figure.