Agents urged to reassess tenant risk as debt pressure reshapes affordability landscape

South Africa’s rental market may appear stable at first glance, but new data suggests a more complex and potentially risky reality beneath the surface. According to the latest PayProp Rental Index Q4 2025, rising consumer debt is putting increasing pressure on tenants, prompting agents to rethink how they assess affordability and long-term risk.

Debt, not rent, is becoming the real pressure point

While rental affordability metrics have remained relatively stable, debt is quietly taking up a growing share of tenants’ income.

In Q4 2025, the average rental applicant earned R44,683 per month, which is a modest 3.5% increase year-on-year. However, this improvement is being offset by rising debt repayments, which now consume an average of 46% of income, up from 44.1% the year before.

By comparison, rent accounts for 28.4% of income, slightly down year-on-year, leaving tenants with just 25.5% of their income as disposable income, a decline from 27.2% previously.

According to Michelle Dickens, this shift is significant. “While rent remains a key consideration, the data shows that debt is increasingly also a primary constraint on tenant affordability," she said.

With the South African Reserve Bank holding interest rates steady, there is little short-term relief expected for indebted households.

Rental inflation rising as tenants shift to smaller homes

Recent data from independent economist John Loos adds important context to these affordability pressures, showing how tenant behaviour is already shifting in response.

Rental inflation accelerated to 4.0% year-on-year in March 2026, up from 3.7% previously, signalling a continued recovery in the rental market. However, growth is not evenly distributed across property types.

Smaller, more affordable rental units are outperforming:

• Townhouses: 4.6% rental inflation
• Flats: 4.2%
• Free-standing houses: 3.3%

This trend reflects a financially constrained consumer base, with tenants increasingly prioritising affordability and adjusting their housing choices accordingly.

In effect, as debt pressure rises, demand is shifting toward smaller, more cost-effective rental options, reinforcing the idea that affordability is being shaped not just by rent, but by overall financial pressure.

Western Cape continues to outperform, but affordability is tightening

Loos’ data also highlights the continued outperformance of the Western Cape rental market, where rental inflation reached 6.9% year-on-year in March, significantly higher than in other major provinces.

This is largely driven by sustained demand, semigration trends, and long-term lifestyle appeal. However, it is also contributing to a growing affordability gap.

Over time, this has resulted in significantly higher cumulative rental inflation:

• Western Cape: 126.7% since 2010
• Gauteng: 62.5%
• KwaZulu-Natal: 76.1%

While demand remains strong, rising costs may begin to influence migration patterns as tenants and buyers reassess affordability.

Why traditional affordability checks may fall short

For many agents, tenant screening has historically focused on rental-to-income ratios and credit history. But the latest data suggests this approach may no longer be enough.

Tenants may still appear financially stable when assessed purely on rent affordability. However, once debt obligations are factored in, their financial resilience weakens, increasing the risk of future arrears.

This is where more nuanced affordability assessments become critical. Rather than focusing only on whether a tenant can afford rent today, agents are encouraged to consider disposable income after debt, exposure to interest rate changes, and ongoing affordability beyond initial placement.

Encouragingly, effective arrears management can still make a meaningful difference. PayProp data shows that 64% of tenants in arrears respond to automated reminders within 48 hours, highlighting the value of proactive systems.

Higher incomes improve their risk profile, but unevenly

Despite mounting debt pressure, there are signs of improvement in overall tenant risk profiles.

The proportion of applicants classified as minimum risk rose to 43.6% in Q4 2025, up from 40.8% a year earlier, while high-risk applicants declined.

This shift is largely linked to rising incomes, particularly among higher earners. Among tenants earning more than R80,000 per month, a significant majority are classified as minimum risk.

However, this improvement is not evenly distributed across the market.

Gender gap adds another layer to affordability

The data also highlights a widening gender gap in the rental market.

Male applicants earned 26.2% more than female applicants in Q4 2025. As a result, women spent a larger share of their income on rent, while men carried higher debt burdens.

Interestingly, despite earning less, women ended up with slightly more disposable income due to lower debt exposure — suggesting potentially stronger financial resilience in certain scenarios.

A more nuanced view of tenant affordability

Taken together, the data paints a far more nuanced picture of tenant affordability in South Africa.

While rental growth has slowed and incomes have improved, rising debt repayments, shifting rental demand, and structural inequalities are reshaping financial stability at a household level. For agents and landlords, this means moving beyond surface-level indicators and adopting a more holistic view of tenant risk — one that considers the full financial picture, as well as broader market trends.

Understanding how tenants balance rent, debt, and disposable income will be key to maintaining stable rental portfolios in a market where financial pressure is quietly building.