PayProp has published its latest rental index, highlighting how the Covid-19 lockdown devastated the rental market in South Africa.
The report shows that rental growth continued to decline in the final three quarters of last year.
In November, for the first time since the index launched in 2012, growth was negative with the average rent 0.3% lower than in November 2019.
Expressed in rand terms, the average rent increased from R7,844 in Q4 2019 to R7,854 in Q4 2020 – an increase of R10 over the year.
PayProp head of data analytics, Johette Smuts, said economic revival continues to be strained with lockdown restrictions still in place, albeit slightly lifted.
“Affordability remains an important consideration for consumers in general, but specifically among tenants. As a result, we expect rental growth to remain muted for some time.”
From a quarterly perspective, average rental growth was already under pressure coming into the year, slowing even before the pandemic took hold, she said.
“Four years ago at the start of 2017, rental growth rates were above 7%. Since then, growth trended downward and then sideways, neither speeding up nor slowing down, between 3% and 4% for most of 2018 and 2019.
“Rental growth in the first quarter of 2020 still followed that trend, clocking in at 3.2%.”
Smuts said a few factors impeded growth over the year – the first of which being the obvious loss of income due to the lockdown.
As a result, tenants simply couldn’t afford an increase in their rent. Added to that, there was dramatically less demand for higher-priced properties and landlords were left with little choice but to curb their expectations when setting their asking price.
The second factor is that many short-term and leisure rental properties moved onto the long-term rental market in 2020, after a sharp decline in tourism, both locally and from international visitors.
This led to an oversupply of housing – particularly in tourism hotspots like Kwa-Zulu Natal and the Western Cape, putting further downward pressure on rental prices.
Finally, in 2020 many tenants chose to take advantage of lower interest rates by moving onto the property ladder.
This exit of tenants from the rental market meant an additional oversupply of rental properties to the already overstocked pool, further pressuring the rental price.
Eastern Cape – average rent is R6,234
The Eastern Cape’s average rent, R6,234 in Q4 2020, was the second lowest out of all the provinces. However, rental growth was a nation-leading 3.9%.
Free State – average rent is R6,525
At R6,525 in Q4, the Free State average rent is currently the third lowest in the country, but showed great growth throughout the year.
The last quarter’s growth of 1.6% was the second-highest in South Africa (after the Eastern Cape) and well above the national figure of 0.2%.
Gauteng – average rent is R8,421
Gauteng rents remained high throughout the year, and at R8,421 were only beaten by the Western Cape. Rental growth trended downward during the course of the year, mirroring the trend seen in national rental growth.
In Q4 this figure was 0.7% – sluggish, but still higher than the national average of 0.2%.
KZN – average rent is R8,232
Rent in KwaZulu-Natal became slightly cheaper between Q1 and Q4 of 2020, albeit only by R9 a month.
But even after three consecutive quarters of negative year-on-year rental growth, the province is still the third-most-expensive in which to rent.
Limpopo – average rent is R6,909
In Limpopo, rents continued to fall over the year when compared to the year before. The province experienced four quarters of negative rental growth (measured year on year) – and the same was true for 2019.
Average rent of R6,909 in Q4 was down 3.3% over the same quarter the previous year, making it the worst-performing province in terms of rent growth.
Mpumalanga – average rent is R7,504
Average rent in Mpumalanga in Q4 was R7,504, below the national average of R7 854. By contrast, rental growth was higher than the national average of 0.2% at 1.4%.
North West – average rent is R5,286
North West’s average rent remained the cheapest out of all the provinces at R5,286 in Q4.
This is mostly due to the lower pricing of student housing. Between Q4 2019 and Q4 2020, average rent declined by 0.6%.
Northern Cape – average rent is R8,042
Even though average rents in the Northern Cape contracted by 2.9% between Q4 2019 and Q4 2020, they were still higher than the national average of R7,854.
Western Cape – average rent is R9,253
Rent in the Western Cape decreased by R45 or 0.5% between Q4 2019 and Q4 2020.
The province is still the most expensive in which to rent, with tenants paying an average of R9,253 – over R800 more than in Gauteng, the second-most expensive province for tenants.