Rental trends and prices in South Africa revealed

Increasingly low confidence levels and mounting affordability pressures amongst South Africans indicate increased demand for rental properties across the country.

PayProp’s Johette Smuts says it was announced this quarter that South Africa is in a technical recession for the first time since 2009. She says Growth Domestic Product growth has been lower than population growth for some time now, which means the average person is just getting poorer.

“And it doesn’t help that our unemployment rate is at its highest level in 12 years. The truth is, living standards can’t improve without economic growth,” says Smuts.

She says the spike in rental growth noted towards the end of 2016 was temporary, most likely as a result of holiday rentals. “The weighted average year-on-year growth rate in quarter two of 2017 (6.87%) is lower than in quarter one (7.62%) and more in line with previous growth rates.” The weighted national rental average for quarter two in 2017 was R7 080.

Western Cape experiences ‘semigratory’ influx

Smuts says the Western Cape is the only province with a slight upward trend over the past four quarters. It is also, once again, the most expensive province to live in as it attracts the highest rent. This province is seeing a ‘semigratory’ influx of people from other provinces, especially Gauteng, which has increased demand, leading to higher rental prices in the region.

“We expect this trend to continue and Western Cape rents to continue their double-digit growth, at least in the short term,” says Smuts.

On the flipside, she says a downward trend has been tracked in the Eastern Cape, Free State and KwaZulu-Natal, and this could indicate an oversupply in rental properties in those areas.

Gender comparison in rental data

The biggest difference by far is in average income - men have a 30% higher net income than women, based on PayProp credit check data. The Eastern Cape reports the lowest difference in income, but also the lowest income for both men and women.

“Despite the big disparity in income, men spend on average only 11% more on rent than women. In relative rental values, men rent properties that are priced slightly above the national average, while properties rented by women are very much in line with the average national rental,” says Smuts.

She says even though women have lower average incomes, they have a slightly better debt-to-income ratio than men. This ratio also improved more for women than for men over the last year. A year ago, this ratio was 45% for females and 42% for males, and this could very well be a big contributing factor to the higher average credit score.

“We’ve heard that men are from Mars and Women are from Venus, but when it comes to tenants, everyone is on the same planet. It is really important to vet each tenant on their own merits,” says Smuts. 

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