The two provincial ‘gold mines’ for landlords in South Africa

National rental vacancies were at historic lows in the first quarter of 2024, and the Western Cape and Gauteng offer the best markets for property investors and landlords.

According to TPN’s Vacancy Survey Report for the first quarter of 2024, the number of households renting is increasing, while home ownership is on the decline.

The survey assesses the number of vacant full-title and sectional-title residential units, offering a comprehensive overview of the industry.

The report highlighted that the percentage of households in the rental market increased from 22.5% in 2022 to 23.9% in 2023.

The credit bureau noted that this is a result of high interest rates combined with poor employment and general political and economic uncertainty.

These factors have led to a decline in the number of households living in a property that they own or are in the process of paying off.

In the first quarter of 2024, the national residential vacancy rate dropped to 4.42% from 6.69% in the previous quarter, the lowest level since TPN’s survey began.

The current rental market is 9.66 points above equilibrium due to higher demand than what is available within the rental market, which is good news for landlords.

Additionally, the low vacancy rates offer investors increased security and reduce the risk of units remaining unoccupied.

Despite the optimistic trends, some provinces offer better markets and opportunities than others.

TPN pointed out that the Western Cape retained its position as the province with the lowest number of vacant rental units in the country.

Rental demand increased from 85 points in 2023 to 90 points in 2024. The Rental Market Strength Index increased further to 73 points as the supply rating decreased from the fourth quarter of 2023 to the first quarter of 2024.

The lack of supply and strong demand caused residential vacancies to drop to 1.51%, a notable 2.91% less than the national average—meaning rentals in the province are more likely to remain occupied than any other province.

The second province of opportunity is Gauteng, as it has the highest percentage of households renting.

A total of 37.8% of Gauteng households live in rented accommodation, compared to 35.9% who live in fully paid, owned properties, 10.5% who live in owned but not yet fully paid properties, and the balance who occupy property rent-free (15.8%).

Additionally, the province’s vacancies reduced from 8.14% in the fourth quarter of 2024 to 4.3% in the first quarter of 2024, dropping dramatically as demand is outpacing supply.

This, combined with the fact that the highest rental value band, between R12,000 and R25,000 per month, had the highest demand index at 61.56 points, means the two provinces are potential gold mines for landlords and investors in the first half of 2024.

Due to the high interest rates in the second quarter of 2024, the preference for renting over home ownership is expected to continue.

Read: R4,200 per month blow for homeowners in South Africa leaves a mark