One of South Africa’s leading lenders has revealed which provinces are attracting the most rental investment compared to other home loans.
The clear leading location for buy-to-let (BTL) investors is now the Western Cape, according to Standard Bank. A massive 31% of all bond applications in the province are connected to buy-to-let investment, compared to a national average of 12%.
Beneath the headline numbers lie a diverse range of investments, according to Standard Bank. As well as buying pre-existing properties, an increasing number are buying plots to construct multiple new homes, and there is also growing interest in B&Bs to serve the province’s tourist demand.
Gauteng has also experienced stronger-than-average rental investment, along with the Eastern Cape. On the other hand, just 6% of home loans in KwaZulu-Natal were for investment purposes.
Why the Western Cape and not KZN?
A quick look at data from the PayProp Rental Index shows why the Western Cape is a hotspot for BTL investors. The province had the highest rental growth rate in South Africa in Q2 and Q3 of 2024, while consistently boasting the lowest share of tenants in arrears. The province’s high property prices are a barrier to entry for investors, but for those who can afford to buy, the returns can make it very worthwhile.
Meanwhile, rental growth in KwaZulu-Natal has been sluggish since mid-2023, and briefly turned negative in Q1 2024. While it wasn’t South Africa’s worst-performing rental market last year, its combination of above-average prices and below-average growth hasn’t appealed to investors.
For agents and investors, the main question now is which provinces will perform well in 2025. The best way to find out is to subscribe to the PayProp Rental Index! The Rental Index for Q4 2024 is coming soon, and preliminary data shows that another province has shot to the top of our rental growth leaderboard.
To get an early look at the results ahead of everyone else, sign up for our free Masterclass on 20 February.
