Average rental increases by 6,4%

The average South African rental for the second quarter of 2016 was R6 570.50, a 6.4% increase from the same period in 2015.

PayProp Group CEO Louw Liebenberg says that the figures show a welcome return to stability after a one percentage point drop from the 7.4% measured in Q4 2015.

"This has been an extremely interesting quarter to watch - one in which we?ve dug deeper into tenancy dynamics than ever before, resulting in our view that the average tenant is far more financially vulnerable than previously thought."

In the period under review, tenants who earn below R10 000 per month used up more of their available credit than other tenants. But from this point onward the trend line flattens out until the R40 000 pay bracket - which is not as one would expect.

The data shows that 'in-the-middle? consumers are all equally indebted - and that tenants' use of available credit only really dips when earning above R60 000 per month. Considering that tenants earning between R20 000 and R40 000 typically rent for R6 000 to R10 000 per month, and that 89% of all rentals are for less than R10 000 per month, the 'sweet spot' of the rental market is where the problem of over-indebtedness occurs.

Liebenberg says that another way to measure tenants' over-extension is the proportion of debt repayments relative to disposable income. "Currently, tenants owe on average 40% of their pre-tax income to credit providers. That is up from 33% in March 2015 - a dismal worsening of matters over time." In addition, the average South African tenant has by now used up 70% of all credit available to them. This leaves an extremely small manoeuvring space for tenants to absorb ?life shocks? that may come at them - potentially causing defaults.

Liebenberg says that the Index has also produced data in support of the theory that Gauteng residents are ?migrating? to the Western Cape. "Rental growth in Gauteng has been declining for some time - and corresponding increases are evident in the Cape. In economic terms, this indicates a decline in demand in Gauteng, relating with an increase in demand in the Western Cape."

The Index shows that rentals above R10 000 are growing at a significantly faster rate in the Western Cape than in Gauteng. Liebenberg says that assum­ing that there is indeed an underlying ?migration? from Gauteng to the Western Cape, this would seem to be driven by high-value rentals.

Liebenberg says that the stabilisation of rental values gives no indication of the underlying movements between the provinces, including the migration to the south, a faltering economy in the Northern Cape, and possible industrial resurgence in Limpopo.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 23 Feb 2018
      RE/MAX Property Associates’ Table View Office, which services property buyers and sellers along the Table Bay coastline and surrounds, has recently sold a home in Woodbridge Island for R11 million – the highest price paid for any home in the sought-after security complex.
    • 23 Feb 2018
      Choosing to invest in an overseas property can be daunting. But as more and more investors recognise the value of a diversified portfolio that includes property outside of their own country of residence, international property investment is growing in popularity.
    • 23 Feb 2018
      The positive change in South Africa’s political landscape is paving the way for an upswing in the local property market.
    • 22 Feb 2018
      An excellent credit score is one of the most priceless assets a potential home buyer can have. This tool has the power to secure favorable mortgage and refinancing rate, influencing everything from the size of the loan repayment to the interest rate on the home loan.
    • 22 Feb 2018
      What do you do if you love your home’s location and the area, but the home no longer fits your growing family’s needs? Do you stay and renovate your existing home or find a home that meets your developing criteria?
    • 22 Feb 2018
      While every owner wants to sell their property at the best possible price, overpricing a home can be the kiss of death for a sale.
    • 21 Feb 2018
      Given the hand they were dealt, government has performed a delicate balancing act which it is hoped will serve to reignite confidence in investment in South Africa, regain our global credibility and satisfy the credit ratings agencies, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
    • 21 Feb 2018
      The real estate mantra, ‘location, location, location’ remains a strong market influence regardless of the prevailing economy, with suburbs like Rondebosch enjoying the buffering benefit of being ideally situated.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us