Bad news for renters in South Africa

The average rent paid in South Africa has hit record highs, which has pushed tenants into tighter rental brackets, putting pressure on tenant finances and deposits when coupled with high interest rates and inflation.

This trend was highlighted in PayProp’s latest Rental Index Report for the fourth quarter of 2024, which showed that the average rent now exceeds R9,000 for the first time, reaching R9,051. 

This marks a 5.2% year-on-year increase, with rents rising by R453 compared to a year earlier and R195 above the previous quarter.

PayProp said stronger rental growth throughout 2024 has pushed more tenants into higher price brackets. 

Although the largest group of tenants still pays between R5,000 and R7,500 per month, their share has decreased from 31.2% in Q4 2023 to 28.9% in Q4 2024. 

At the same time, all higher rental price brackets have expanded. Over half (51.4%) of tenants now pay R7,500 or more in rent, up from 47.6% a year earlier.

Amid this rental growth, the Eastern Cape stands out as the most affordable province for tenants. 

According to PayProp, 11.1% of properties in the Eastern Cape rent for between R1,000 and R2,500, and 21.6% are priced between R2,500 and R5,000. 

This is significantly higher than the national averages of 2.8% and 14.9%, respectively. However, even in the Eastern Cape, the availability of properties priced below R7,500 has declined over the past year.

The Free State also offers some relief for budget-conscious tenants. It was the only province to see an increase in properties within the R2,500 to R5,000 bracket in Q4 2024 compared to a year earlier.

However, as in other regions, the proportion of properties in the R5,000 to R7,500 range has decreased while the more expensive brackets have grown.

Gauteng, which is similar to the national rental distribution, has also seen a shift toward higher rent prices as all the more expensive categories grew. More than half of Gauteng’s tenants now pay R7,500 or more per month.

KwaZulu-Natal has also seen a reduction in its affordable end of the market. The province has seen significant growth in the premium market, with the most substantial increase in properties renting for over R15,000.

Limpopo, which has been known for its affordability, has experienced significant rental growth over the years. However, it has also seen a decline in lower-priced properties.

The North West and the Northern Cape remained relatively stable, while the Western Cape, by contrast, remains the most expensive province for renters.

There are now more homes renting for over R15,000 per month in the Western Cape than for R5,000 to R7,500 due to a significant decline in the more affordable category.

PayProp’s report also highlights how high interest rates and inflation are putting pressure on tenant finances. The report showed that tenants are spending a larger portion of their income on rent.

This portion increased from 28.3% in Q3 2023 to 28.7% in Q4 2024. Additionally, debt repayments have risen to 44.1% of income, up from 43.6% a year earlier.

However, the report highlighted a slight improvement in the last half of 2024 due to a reduction in interest rates.

Average tenants now have 27.2% of their income left after paying rent and debt obligations, compared to just 23.0% two quarters earlier.

Despite this positive trend, financial strain remains a concern. PayProp notes that 17% of tenants are still in arrears, which is impacting landlords’ decisions on deposits.

Over the past year, landlords and agents have started requiring slightly larger deposits. The average deposit in Q4 2024 was 1.31 times the average rent, up from 1.29 in Q4 2023.

PayProp said this approach helps landlords cover repair costs and ensures that deposits keep pace with rising rental prices.