Cheapest and most expensive provinces for renters in South Africa

New data shows that the Free State is the cheapest province in South Africa to rent property, while the Western Cape is the most expensive.

According to the latest TPN Residential Rental Monitor report for Q2 2024, despite facing economic uncertainty, high unemployment, and a challenging political climate, many tenants have continued to meet their rental obligations.

This stability has provided relief to property investors, who depend on steady rental income to offset rising expenses.

However, sustaining high rates of tenants in good standing has required strict vetting processes and collection efforts to protect investors’ cash flow, especially amid increasing costs for maintenance, security, rates, and taxes.

Given the challenging financial climate, property investors are balancing the risk of vacancies with the need to set realistic rental rates.

Nationally, rental prices have increased by 4.29% year-over-year, showing a slight decrease from the 4.87% growth observed in the previous quarter.

This deceleration reflects broader economic pressures and the strain on consumer finances, which has forced landlords to carefully adjust rental rates to attract and retain tenants.

In Gauteng, rental growth has slowed for three consecutive quarters.

After a notable rebound in the first half of 2023, rental escalations in the province have since declined, reaching 3.32% in the second quarter of 2024.

Meanwhile, the Western Cape, which had seen strong growth, is also experiencing a slight decline in its rental escalation rate, from 7.10% in Q1 2024 to 6.98% in Q2.

These adjustments indicate that even in higher-demand areas, rental increases must be moderated to align with tenants’ affordability.

KwaZulu-Natal, however, experienced a slight rise in rental growth from 4.86% in Q1 to 4.97% in Q2.

Yet, high vacancy rates in the region continue to pressure investors to prioritise on-time rental collection, which remains essential for maintaining cash flow.

The Eastern Cape also showed growth, with rental rates increasing from 4.16% in Q4 2023 to 4.41% in Q1 2024, reaching 4.7% by Q2.

The Eastern Cape’s rental market, which struggles with high vacancy rates, appears slower in responding to shifts in market demand.

Among the provinces with smaller rental populations, rental escalations were collectively 5.23%, which represents a slight decrease from the previous quarter.

In this environment, tenant retention is becoming increasingly vital, as even minor shifts in tenant populations can have a noticeable impact on rental revenues.

When it comes to provincial rankings for rental costs, the Free State is the most affordable option for renters, with the average monthly rent for a full-title property at R6,557.

Limpopo follows closely with an average rent of R6,626, while the Northern Cape ranks third at R7,815.

In contrast, the Western Cape is the most expensive province, with an average monthly rent nearly double that of the Free State, at R12,755.

Gauteng and KwaZulu-Natal follow, with average monthly rents of R9,652 and R9,632, respectively.

Sectional title properties show similar rankings across provinces; however, Limpopo is an outlier, where sectional title rentals are slightly higher, averaging R6,736, or R110 more than full-title properties.

While property investors hope for continued rental growth to offset rising operational costs, the market’s price sensitivity has led them to focus on tenant quality over aggressive rent hikes.

This shift has prompted an emphasis on efficiency and accuracy in operations to sustain returns.

Reflecting these dynamics, the TPN Residential Gross Yield for sectional title properties hit a record of 10.79% in Q2 2024.

Historically, sectional title properties have performed better than full-title properties, partly due to the heightened security they offer—a critical factor for many tenants.

Full-title rental yields are also showing improvement, with the national full-title yield rising from 7.44% in Q1 to 7.52% in Q2.

The TPN report underscores how the South African rental market remains heavily influenced by economic challenges, pushing investors to prioritise sustainable returns through prudent tenant management and realistic pricing adjustments across provinces.

Read: Discovery to launch new ‘affordable’ medical aid plan in South Africa