For the third quarter of 2021, the PayProp Rental Index showed that rental growth was minimal year on year, measuring 0.1% in July, 0.3% in August, and 0.2% in September.
The index is a quarterly guide that outlines trends in the South African residential rental market. The quarterly guide is compiled from transactional data collected by PayProp, a South African residential rental transaction processor.
Subdued rental growth continued into the third quarter of 2021 amid high inflation levels, primarily driven by increasing transport costs in the absence of real economic growth.
Johette Smuts, head of data analytics at PayProp, says tenant affordability continues to put downward pressure on rental prices.
“Unemployment is at an all-time high in South Africa, framed by an economy that is slow to improve. Moreover, tenants continue to feel the pinch of the Covid-19 pandemic, especially in the light of the predicted fourth wave.”
The index showed that Mpumalanga was the only province to experience positive year on year rental growth in all four past quarters. Mpumalanga also experienced the fastest rental growth of any province in the third quarter, with average rents increasing by 3.5% - up R257 from R7 442 to R7 699. Rent in this province is R101 cheaper than the national average of R7 800.
The Western Cape had the second-highest rental growth, at 2.5% year on year over the third quarter. A year ago, the average rent increased from R9 041 to R9 266 in this quarter. Before the 1.8% increase in the second quarter of 2021, the Western Cape had experienced four consecutive quarters of negative rental growth. However, this province is still the most expensive place to rent.
Second, under the title of worst performing out of all provinces, is Gauteng. Recording its second consecutive quarter of negative rental growth with a decrease of 2.3%. In the second quarter, rent decreased by 0.6% year on year, after two quarters in which rent increased by 0.7% each time. The average rent in the third quarter was down to R8 235 from R8 432 the previous year.
In KwaZulu-Natal rental growth bounced back in the second and third quarters of 2021, after two quarters of declining rent. The average rent increased 1.3% year on year in the third quarter to R8 232 - up from R8 123 in 2020. If the rebound continues, KwaZulu-Natal could overtake Gauteng to have the second-highest rentals in South Africa in the first quarter of 2022.