South African Residential Rental Market - Q3 2022 - Payprop Rental Index Report
PayProp's quarterly Rental Index for Q3 2022 has highlighted continued growth in the residential rental market with a 2.9% year-on-year increase, the strongest performance since Q1 2020.
Average national rent increased from R7 800 in Q3 2021 to R8 023 in Q3 2022, the first quarter in which this figure broke the R8 000 mark.
Rental Growth Rates:
While rental growth has recovered from the lows of 2020 through 2021, it still lags the increases seen in 2019 and before, says Johette Smuts, Head of Data Analytics at PayProp. In Q3 2022, the average national rental grew by 3%, 3.1% and 2.6% year-on-year in July, August, and September respectively, compared to 3.7%, 3.5% and 4.2% for July, August, and September 2019.
It is relatively difficult to predict how far this rental market recovery will go. Higher interest rates and bond repayments are very likely incentivising tenants to rent for longer, thereby increasing the demand for rental properties and ultimately pushing prices up.
The Northern Cape tops this quarter's league table with rental growth of 8.1% between Q3 2021 and Q3 2022 - the highest out of all the provinces by some distance. As a result, rents increased by R652 to R8 721, making the Northern Cape the second-most expensive province in which to rent.
The North West experienced the second-highest rental growth rate during Q3, although it still has the lowest average rent. Average rent in the province during Q3 2022 was R5 509, up 4.8% or R252 from the same quarter a year prior. It is worth noting that a large proportion of properties managed through PayProp in this province are student housing, explaining the low average rent values.
Third in terms of growth this past quarter was Limpopo, where average rent increased by 4.7%. The average went up by R330 to R7 354, almost R700 below the national average.
Gauteng, previously the second most expensive province in which to rent, was overtaken this quarter by both the Northern Cape and KwaZulu-Natal. Rent in the province increased by just R147 year on year, from R8 235 in Q3 2021 to R8 382 in Q3 2022.
The Western Cape held onto the position of most expensive province for renters, with an average rent of R9 533, more than R1 500 above the national average.
Tenant arrears has improved steadily on a national level in the third quarter, with the average arrear percentage dipping below pre-pandemic levels for the first time during Q3. We are however not completely out of the woods yet. While rising interest rates may increase the demand for rentals, they also slow down economic growth, which puts further pressure on tenants' finances and ultimately negatively impacts their ability to afford higher rental price increases.