Good news for landlords in South Africa

 ·18 Jan 2025

As South Africa moves into 2025, the residential rental market presents encouraging news for landlords.

According to the latest TPN Vacancy Survey Report, vacancy rates for rental properties have reached their lowest levels since the survey’s inception in 2016.

This trend highlights a strong demand for rental properties nationwide, with the national vacancy rate decreasing to 5.07% at the start of 2025, down from 6.72% recorded in 2024.

For property investors, this development underscores the potential for steady rental income and greater returns.

The average residential vacancy rate for the first three quarters of 2024 stood at 5.4%, signalling robust performance in the sector.

This consistent demand is bolstered by the slower pace of new supply entering the market, which has created favourable conditions for landlords.

Notably, the Western Cape has emerged as a shining star, boasting a record-low vacancy rate of just 1.07% in the third quarter of 2024. This marks the province’s lowest vacancy rate ever, surpassing its previous record of 1.16% set in 2016.

The Western Cape’s remarkable performance is attributed to a combination of factors.

The province’s low supply rating of 38.37 points, compared to the national average of 55.5 points, reflects the limited availability of rental properties.

Simultaneously, a high demand rating of 88.12 points underscores the strong interest in renting within the region.

These dynamics have culminated in a Market Strength Index of 74.88 points, far outpacing the national average.

This surge in demand is driven largely by affluent South Africans relocating from provinces like Gauteng in search of better service delivery and overall quality of life.

The Western Cape’s reputation as the country’s best-run province, with efficient governance and infrastructure, has made it an attractive destination for tenants seeking stability.

The influx of tenants into the Western Cape has naturally led to higher rental prices as landlords capitalize on the demand-supply imbalance.

While this trend benefits property investors, it poses challenges for lower-income households, who may find themselves priced out of the market.

Nevertheless, the province’s strong performance is a testament to the resilience and attractiveness of its rental market.

Other provinces, such as Gauteng and KwaZulu-Natal, have also seen improvements, albeit less pronounced than the Western Cape.

Gauteng’s vacancy rate dropped to 5.81%, signalling an uptick in occupancy rates. However, with a Market Strength Index of 49.92 points, Gauteng’s rental market remains below the national equilibrium, reflecting a slight oversupply of rental properties.

Similarly, KwaZulu-Natal recorded a modest decline in vacancies, with its rate decreasing to 7.12% in the third quarter of 2024. The province’s Market Strength Index of 45.31 points indicates ongoing challenges in balancing supply and demand.

On a national level, year-on-year vacancy rates decreased by 19.68%, a significant improvement that bodes well for the rental market’s stability.

With rental growth expected to accelerate through the first quarter of 2025, landlords can anticipate continued demand for properties in most regions.

The recent interest rate cuts by the South African Reserve Bank could encourage some tenants to transition into home ownership, particularly in the higher rental value bands.

However, the economic and political volatility of recent years suggests that many consumers may take time to recover fully, delaying this shift for the near term.

For property investors, the outlook for 2025 remains positive, with the national vacancy rate expected to stay in the mid-5% range.

As landlords seek to grow rental incomes, proactive management and strategic planning will be key to navigating potential shifts in tenant behaviour and market dynamics.

Despite the possibility of increased vacancies in higher-end rental properties, the overall demand for rental housing is poised to remain strong, offering landlords a promising opportunity to achieve sustainable returns in the coming year.


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