Rental market finally on the mend

Rental market finally on the mend

Category Rentals

The PayProp Rental Annual Market Report as at the end of 2021 shows that the rental market finally appears to be on the mend.

After close to two years of negative to little growth in the average rentals, it seems that the market has stabilised with some areas clawing back from negative to positive growth.

An important trend is that while the average rents paid in the major metro areas remain the highest, the smaller inland provinces have achieved the highest average growth in rental rates. This could be attributed to, among others, the lower base rentals offered in these provinces.

The average national increase in rentals paid as at December increased by 1.5% year on year (YoY) which is the best growth since July 2020.

And for the year, the average residential rent increased by 0.8% year on year, from R7 854 per month in Q4 2020 to R7 906 in Q4 2021.

Overall, household budgets are under pressure with higher debt levels evident, driven largely by financial pressure induced by the Covid-19 lockdowns experienced over the last two years.

PayProp research shows that tenants now spend almost half of their income on debt payments with rent comprising around 29% of that.

Expectedly, this impacts tenant arrears which was particularly problematic as a result of the lockdown in 2020 and first half of 2021.

The research shows that average arrears have improved to 18.4% as at December which is in fact even lower than the pre-pandemic level of 19.4% as at Q1 of 2020.

Tenant deposit requirements stand at around 1.25 times the monthly deposit. This has remained fairly stable over the last two years across all of the provinces.

How the regions are performing, ranked by ave rental paid

Western Cape – the average monthly rental is now R9 413, increased YoY by 1.7%. The highest volume of rentals is in the R5 000 to R15 000 per month range.

KwaZulu-Natal – the average monthly rental is now R8 386, increased YoY by 1.9%. The highest volume of rentals is in the R5 000 to R10 000 per month range.

Gauteng – the average monthly rental is now R8 253, declined YoY by 2%. The highest volume of rentals is in the R5 000 to R10 000 range.

Northern Cape – the average monthly rental is now R8 287, increased YoY by 3%. The highest volume of rentals is in the R2 500 to R10 000 per month range.

Mpumalanga – the average monthly rental is now R7 791, increased YoY by 3.8%. The highest volume of rentals is in the R2 500 to R10 000 per month range.

Limpopo – the average monthly rental is now R7 168, increased YoY by 3.7%. The highest volume of rentals is in the R2 500 to R7 500 per month range.

Free State – the average monthly rental is now R6 512, recorded a YoY decline of 0.2%. The highest volume of rentals is in the R2 500 to R7 500 range.

Eastern Cape – the average monthly rental is now R6 407, recorded a YoY increase of 2.8%. The highest volume of rentals is in the R2 500 to R7 500 per month range.

Northwest – the average monthly rental is now R5 382, increased YoY by 1.8%. The highest volume of rentals is in the R2 500 to R5 000 per month range.

The trends over the last two years once again highlighted the challenges that come with rental property. Working with an experienced rental agent can help mitigate some of the challenges. The Seeff Property Group for example offers extensive expertise supported by state of the art technology and systems.

Author: Gina Meintjes