Quarterly year-on-year rental growth continues to climb in South Africa, with the average rent increasing by 2.6% in the second quarter of 2022.
The PayProp Rental Index reveals that the average rent increased by R193, reaching R7 971 in Q2 – this is a jump from R7 778 in the same quarter last year, says PayProp’s Johette Smuts.
The moving average trendline, which tracks a rolling three-month average, shows a very clear upward trend, which is “good news” for landlords and agents.
Read our latest Property360 digital magazine below
The news is, however, not good for tenants as consumers continue to battle rising living costs.
For the first time since Q3 2017, the second quarter of 2022 saw all nine provinces record positive year-on-year rental growth.
1. Western Cape – R9 462
This province remains the most expensive for tenants in South Africa, with an average rent of R9 462 in Q2 2022, up from R9 185 in the same quarter the year before. The province recorded rental growth of 3%, outperforming the national average of 2.6% for a fifth consecutive quarter.
2. Northern Cape – R8 626
The average rent increased by 9% year-on-year, by far the highest out of all nine provinces, Smuts says. This figure finished at R8 626 – up R715 from the R7 910 recorded in Q2 2021, allowing the Northern Cape to retain its spot as the second most expensive province in which to rent.
3. KwaZulu-Natal – R8 443
During the first four quarters after lockdown was announced, KZN experienced negative year-on-year rental growth. However, she says the province has now been outperforming the national average for five consecutive quarter, with escalating growth over the past four quarters and 3% growth year-on-year durin Q2 2022. This is above the national figure of 2.6%.
Average rents have increased to R8 443 from R8 200 since Q2 2021, and KwaZulu-Natal is currently the third most expensive province.
4. Gauteng – R8 319
The province experienced four consecutive quarters of negative rental growth recently, but in Q2 2022, it may have started to recover – its most recent recorded rental growth of 0.3% is the first positive change since Q1 2021, but is also the lowest out of all nine provinces.
“Encouragingly, the moving average trendline indicates a positive trend over the last two quarters.”
Average rent increased to R8 319, up from R8 292 in the same quarter last year – comfortably above the national average.”
5. Mpumalanga – R7 870
The moving average trendline shows steep upward growth over the past year. The province recorded rental growth rates above 3% in the last four quarters and outperformed the national average by far. Smuts says that during the most recent quarter, the province achieved growth of 5.2%, the second highest rate in the country.
“Average rents in Mpumalanga rose to R7 870 in Q2 2022, up from R7 484 over the corresponding period the year before. Continued strong performance could see the province overtake the national average, currently at R7 971, by the end of next year.”
6. Limpopo – R7 350
The winning streak continues in this province, with year-on-year rental growth of 4.7% recorded in Q2 2022. The province experienced the third highest rental growth of any province this quarter, with average rent increasing from R7 017 in Q2 2021 to R7 350 in Q2 2022.
Smuts says Limpopo came off 14 consecutive quarters of negative rental growth up until early 2021 and has seen an impressive turnaround since.
“Rental growth in the province has outperformed the national average every quarter since Q2 2021, although looking at the trendline, it appears that it might now be levelling off.”
7. Eastern Cape – R6 451
Rental growth in this province has outperformed the national average in all but one of the past 10 quarters. The moving average trendline shows that the downward trend from the end of 2020 ended in Q3 2021, with rental growth picking up again over the three most recent quarters.
In Q2 2022, rental growth in the Eastern Cape was 4.4%.
“Rents increased to R6 451, up from R6 365 the same quarter a year ago. During this most recent quarter, the province was the third cheapest to rent in,” Smuts says.
8. Free State – R6 328
Rental growth here has rebounded over the last four quarters, but overall performance is still weak. The province experienced negative rental growth throughout 2021, and while the 1.9% of Q2 2022 was the region’s fastest since Q3 2020, it was still the second lowest in the country.
Average rent during the most recent quarter hit R6 328, also the second lowest out of all provinces
9. North West – R5 478
Average rents increased by 3.9% during Q2 2022. This was substantially higher than the national average of 2.6%, and an improvement from the 2% seen the preceding quarter.
Smuts says growth rates in this province have outperformed the national average for the past six quarters after relatively small falls in 2021.
In Q2 2022, North West was still the cheapest option for tenants, with average rents increasing to R5 478 from R5 274 in Q2 2021 – a difference of R204.
Tenant payment performance
On the topic of tenant payment risk, Smuts cautions that high levels of inflation and increasing interest rates continue to put pressure on tenants’ already strained financials.
“The continued financial demands faced by consumers as we move through 2022 could force those in the rental market to seek out cheaper accommodation options, which would prevent a complete rental market recovery.
“On the other hand, higher interest rates and a reduced ability to save may mean that some higher-income tenants decide to keep renting instead of buying their own properties, which will have the opposite effect.”
Although the country has seen continued recovery of the rental market in the second quarter, agents and landlords should continue to remain mindful of the negative effects on a tenant’s ability to pay their rent.
“The challenge for rental agents over the next few months will be to monitor their portfolios for signs of growing arrears, use the tools available to them to recover late payments where necessary, and vet all applicants carefully,” Smuts says.
IOL BUSINESS