Housing shortage boosts rental rates

A shortage of supply is causing double-digit growth in residential rental rates in mostly rural provinces like Mpumalanga and Limpopo.

Rental processor PayProp launched the second edition of its rental index this week.

The index shows Lephalale (formerly Ellisras) in Limpopo is still the most expensive place to rent in the country at an average rent of R12471 a month. Average rent in Limpopo grew at 11.4% year on year in February.

This amount is for an average property with two-and-a- half bedrooms and excludes water and electricity payments.

The average monthly rent in Lephalale is more than double that in Cape Town (R5030) and almost four times as much as rent in Potchefstroom (R3475).

Mpumalanga and Gauteng also boasted double-digit rental growth, at 11% and 10.1% respectively.

Mike Schüssler, economist at Economists.co.za and compiler of the index, said it is clear the three northern provinces, where major civil construction projects like Eskom's new power stations and the Gauteng Freeway Improvement Project are taking place, show higher increases in rent. Coal mines are also opening up in Mpumalanga and Limpopo.

These projects create more jobs, pulling people who pay a premium for a limited supply of housing.

Schüssler said in Limpopo and Mpumalanga the increase in rent is not a reflection of wealth or income in the province, but shortage of supply.