South African Rent Report: Western Cape Tops R10,000!

While rental growth has slowed, rental prices in South Africa have continued to increase, with the Western Cape standing out as the only province with an average rental price exceeding R10,000.

In the previous PayProp Rental Index, it was noted that quarterly rental growth had decelerated after eight consecutive quarters of increases, indicating a potential plateau. Indeed, recent months have shown sustained year-on-year decreases in rental growth, dropping to 4.2% in January, 3.8% in February, and 3.6% in March. This trend resulted in a quarterly average growth rate of 3.8%, the lowest since Q4 2022, suggesting the end of the post-pandemic rental growth recovery. Despite lagging behind inflation, this growth rate is still healthier than the corresponding quarters in 2021 and 2022.

As of Q1 2024, the average rent in South Africa was R8,654, which is just R301 higher than a year ago. PayProp has observed that the distribution of rentals has remained relatively stable nationwide over the past year, with a slight decrease in the R2,500 to R5,000 and R5,000 to R7,500 brackets and an increase in the higher brackets. This shift is likely due to rental increases pushing properties into higher price categories.

Provincial Insights

In the North West, rental growth slightly decreased from the previous quarter's double-digit increase to 9.8%, yet it remained the highest in South Africa for the fourth consecutive quarter. However, the average rent in the North West is R6,301, the lowest of any province.

The Free State saw the second-fastest rental growth, with rents growing by 9.1% year-on-year. The average rent in the province reached R6,927, which is R579 more than a year earlier.

The Eastern Cape recorded the third-fastest rental growth among the provinces, although the year-on-year growth slowed to 5.6% from Q4 2023's 7.3%. The average rent in the Eastern Cape now stands at R7,021, still the third lowest in the country but R371 higher than a year ago.

The Western Cape experienced below-average rental growth for most of 2023. However, in Q1 2024, rents increased by 4.3% year-on-year, surpassing the national average of 3.8% and marking the fifth highest in the country. Average rents in the Western Cape are the highest in the country at R10,300, and due to sluggish growth in the Northern Cape, they are now more than R1,000 ahead of the nearest competitor.

In the Western Cape, the three most expensive rental brackets have more properties compared to any other province. The R2,500 to R5,000 bracket is notably smaller, accounting for just 5.1% of rental properties compared to the national average of 16.2%. Over the past year, there has been a notable shift towards more rental properties in the upper brackets. The R5,000 to R7,500 bracket decreased from 29.8% to 22.7%, and the R7,500 to R10,000 bracket is now the largest at 26.7% of all rentals. Additionally, 16.5% of properties now fall in the R15,000+ bracket, compared to 10.1% nationally.

These trends highlight the dynamic nature of the rental market across South Africa and underscore the Western Cape's position as the province with the highest average rents. For property investors and renters alike, understanding these shifts is crucial for making informed decisions in the evolving rental landscape.