The average cost of national rent in South Africa for Quarter 2 (Q2) 2024 is R8,785, which is R410 more than in Q2 2023 – and rental growth has come in higher than expected, even beating inflation.
This is outlined in PayProp’s most recent Rental Index report, which said that “sometimes, the rental market surprises you,” given the sector’s expectation-beating Q2 performance.
According to the report, on average, the most expensive provinces for rent are:
- Western Cape;
- Northern Cape;
- Gauteng;
- KwaZulu-Natal;
- Mpumalanga;
- Limpopo;
- Eastern Cape;
- Free State;
- North West.
As of Q2 2024, the Western Cape remains the most expensive province for rent, with an average of R10,673, surpassing the next highest province by R1,450.
Despite historically slow rental growth, the province saw a surprising 9.7% increase in Q2, with annual growth accelerating to 11.7% in June, the highest since December 2017.
The Northern Cape, the second most expensive, has an average rent of R9,412 but experienced the second lowest rental growth nationwide at 2.1%.
This follows a period of strong growth in 2022 and early 2023 before a significant decline in late 2023 and early 2024.
Gauteng’s average rent increased to R9,018, closing in on the Northern Cape’s level. However, rental growth has been below average for three consecutive quarters, though it improved to 3.8% in Q2 2024.
KwaZulu-Natal had the smallest rental growth at 1.5%, with rents reaching R8,945. This low increase is partly due to reduced demand from South Africa’s semigration trend. Nonetheless, this marks an improvement from Q1’s decrease and suggests a potential recovery.
Mpumalanga’s average rent rose to R8,484, with growth improving to 2.4% in Q2 from 1.2% in Q1, but it remains below the national average.
Limpopo saw a robust 6.1% increase in rents, reaching an average of R8,128, making it the third highest in growth.
The Eastern Cape’s average rent is R7,113, with a 5% growth rate in Q2, down from 5.6% in Q1 and marking a decline over two consecutive quarters.
In the Free State, the average rent is R6,765, up R374 year-on-year but down from the previous quarter. The 5.8% growth is notable but follows a large 9.1% increase in the prior quarter.
The North West remains the cheapest province, with an average rent of R6,362. Although its rental growth slowed to 6.3%, it remains the second highest in growth.
Better-than-expected rental growth
In the Q1 Rental Index update, PayProp initially noted a decline in rental growth for three consecutive months, predicting an end to South Africa’s post-COVID rental recovery.
However contrary to expectations, rental growth in South Africa made a comeback, increasing to 4.9% in April from March’s 3.6%, experienced a slight drop in May, but then surged to a post-pandemic peak of 5.2% in June – the quickest rise since December 2017.
This means that rental growth in Q2 grew to 4.9%, up from 3.8% in the previous quarter and the highest since Q4 2017.
“The sudden uptick in rental growth in Q2 2024 is a surprise piece of good news for rental agents and landlords after the previous quarter’s drop,” said Head of Data Analytics, Johette Smuts.
This growth, driven by unexpected province performances, marks June 2024 as the first month rental growth exceeded inflation since September 2019, a positive shift for landlords and agents amid a global and local decrease in inflation to 5.1% in June.
“Economists are hopeful that on-target inflation figures mean that interest rate cuts can start as early as September,” although it remains to be seen whether the South African Reserve Bank will agree said Smuts.
Smuts told BusinessTech that “high inflation and high interest rates put financial pressure on tenants. High interest rates are a barrier to many first-time home buyers, which negatively impacts housing sales.”
“Rate cuts would lower bond payments and potentially draw more first-time homebuyers back to the market, reducing demand for rental properties,” said Smuts.
Smuts said that provincial rental growth is influenced by a variety of factors, including (but far from limited to):
1) The supply of properties, which encompasses the rate of building, developments, etc.
2) The demand for rental properties, which can be affected by interest rates and affordability.
3) Economic activity, in certain provinces.
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