According to PayProp Head of Sales André van Rooyen, the data shows a recovery in landlord confidence. Landlords held off on rent increases during and after the pandemic so as not to increase the risk of non-payment. But with tenants’ finances now recovering and the share of tenants in arrears at a near-record low (17.1%), investors and agents have felt able to set above-inflation rent increases and recoup some of their real-terms losses from previous years.
The recovery didn’t reach every province. Growth in Mpumalanga slowed to just 0.2% year on year, and could turn negative this year after a two-quarter slide. The Northern Cape and Gauteng also experienced below-average growth in Q4.
However, the Western Cape put up a third successive quarter of exceptional rental growth. The average rent in the province grew by 10.1% year-on-year, reaching over R11 000 for the first time. Meanwhile, Limpopo capped off a strong year with a nation-leading growth rate of 11.1%, pushing it past Mpumalanga to become SA’s fifth most expensive province for tenants.
Uncertain outlook for Q1 – and beyond
Not every indicator is so positive. Inflation crept upwards throughout Q4, reaching 3.0% in December, and the latest Stats SA data shows that it increased to 3.2% in January. An increase in electricity prices on 1 April will also hit tenants in the pocket.
Global political uncertainty and the prospect of a global trade war have also made further interest rate cuts less likely, so the cost of debt repayments is unlikely to fall further any time soon. Debt repayments account for 44.1% of the average tenant’s spending, according to the PayProp Rental Index, so any interest rate change can have a big impact on affordability.
And while tenant affordability and spending were moving in the right direction in Q4, they are still worse than they were a year earlier. Tenants spent 44.1% of their income on debt repayments and 28.7% on rent in Q4 2024, compared to 43.6% and 28.3% respectively.
Rental market performance this quarter will come down to how resilient tenant finances are in the face of wider economic trends. Get the latest data on national and provincial rents, arrears, tenant finances and more by subscribing to the PayProp Rental Index.
