Real-terms rental growth in Q3 2024 was the strongest it has been since 2017, according to the latest PayProp Rental Index.
Average rents grew 4.8% year on year – down 0.1% from Q2 – but inflation also fell throughout the quarter, reaching just 3.8% in September. As a result, the gap between year-on-year rental growth and annual inflation widened in every month of the quarter.
Year-on-year growth for September was 5.0%, bringing the average rent in South Africa to R8 856 over the quarter – R405 more than in Q3 2023.
Provincial winners and losers
National rental growth was strong but spread out unevenly among the provinces.
The Western Cape led the nation for the second straight quarter. Rents grew by a nation-beating 9.3% year on year, reaching an average of R10 875 – more than R1 400 ahead of the next most expensive province for renters. Rents are on track to hit R11 000 by the end of the year.
At the other end of the table, rents in Mpumalanga grew by just 0.7% over Q3 2023, ending hopes of a rental recovery sparked by last quarter’s uptick. Mpumalanga again has the fifth highest average rent in SA at R8 458, but this figure is falling further behind the national average. Meanwhile, Limpopo is catching up to the chasing pack, with rental growth of 8.4% and an average rent of R8 372.
For its part, KwaZulu-Natal seems to be recovering. Average rents fell 0.4% year on year earlier in the year in Q1, making it the only province to experience negative rental growth in 2024. But after two quarters of improvement, growth reached 3.0% in Q3 to bring rents to an average of R9 010.
Rents in Gauteng are still slightly higher than in KZN, averaging R9 047 – the third highest in SA. But at 3.1%, rental growth in SA’s most populous province was at its lowest in two years. If the slowdown continues, KZN could knock Gauteng off the winnerss podium.
Reasons to be cheerful
The rise in real-terms rental growth could well continue into Q4. Stats SA reports that inflation fell a full percentage point to 2.8% in October, and the Reserve Bank is betting on it to remain low through the first half of 2025.
The Bank accordingly decided to lower interest rates by 0.25% last month, which will further reduce financial pressure on tenants. In fact, tenant finances were already improving in Q3. Arrears fell to a near-record low, with 17.4% of tenants behind on their rent, while disposable incomes grew and average spending on rent remained below 30% of income – a threshold often used as a yardstick for affordability. This should allow landlords and agents to raise rents going into 2025 without putting pressure on tenants.
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