South Africa’s residential rental market continues on a path of strong annual growth, reports the Q3 2024 PayProp Rental Index. But despite robust rental inflation of 4.8% between July and September, tenants have also seen a notable recovery in their financial position.
The report reveals a quarter-on-quarter rise in disposable income, marking a recovery after significant pressure on household finances in recent years. Suggesting good wage growth reported during tenancy applications, tenants are now spending a lower percentage of their income on rent than a year ago, giving them much-needed breathing room even with higher rental prices.
For the first time since early 2023, the average South African tenant also spent less than 30% of their income on rent – a critical benchmark for affordability. The average rent increased to R8,856 in Q3, yet this did not prevent an improvement in affordability metrics.
"Tenants have faced significant financial challenges in recent years, but these figures show that recovery is underway,” says André van Rooyen, Head of Sales at PayProp South Africa. “With affordability improving, there’s real hope for sustained financial relief in the months ahead."
Landlords and rental agents will also find plenty to celebrate. While rental growth fell very slightly from the 4.9% measured last quarter, inflation dropped more sharply, from 5.1% in June to 3.8% in September. As a result, real-terms rental growth ended Q3 at its strongest since 2017 and increased in each month of the quarter. With Stats SA reporting 2.8% inflation in October 2024, real rental returns could increase further in Q4.
Debt pressure easing for tenants
Tenants spent 44.6% of their income on debt repayments between July and September, down 2.1% from a year earlier. And as the South African Reserve Bank's first interest rate cut since 2020 only occurred during the final month covered in this PayProp Rental Index, the average percentage of salary spent on debt repayments will likely fall further as price adjustments follow.
A mixed bag of provincial dynamics
While national rental growth remained strong, there were some clear winners and losers at the provincial level. The Western Cape continued its exceptional performance from Q2, with the country’s highest rental growth of 9.3% and average rents reaching R10875. Average rents in the Western Cape are now more than R1400 higher than the next most expensive province.
Limpopo growth followed closely at 8.4%, by far the biggest increase in growth over the previous quarter. The Free State maintained 5.8% growth, the same as the previous quarter, but still has the second lowest rents in SA.
On the other hand, Gauteng experienced below-average growth of 3.1%, marking its fourth consecutive quarter of slowdown. Mpumalanga lagged with the lowest growth at just 0.7%, snuffing out any hope of a recovery after last quarter’s 2.4%, while rents in KwaZulu-Natal rebounded from earlier declines, growing by 3.0%.
A positive outlook
“This quarter’s results offer a promising outlook for South Africa’s rental market,” says van Rooyen. “While growth varied across provinces, the overall improvement in tenant affordability is a key highlight. Tenants are finding relief as income growth combines with an easing of economic pressures, balancing the impact of rising rents. With falling inflation and lower interest rates, tenant finances are set to strengthen more, paving the way for stronger returns on investment and a more sustainable rental market.”
