Rental growth in the second quarter of 2024 exceeded inflation for the first time since September 2019, according to research by property management payment platform Payprop.
According to its quarterly rental index, rental growth sat at 5.2% in June, making it the highest since the Covid pandemic. This was one percentage point higher than inflation, which fell below 5% in June.
“That’s not only a new post-pandemic high, it’s also the fastest month-on-month rental growth measured in the Rental Index since December 2017,” said Johette Smuts, head of data analytics at Payprop.
The average rental price for the same period, nationally, was R8,785, a R410 increase from the first quarter.
Smuts said this growth was driven by the average rental price increasing between March and June, with the Western Cape recording a R1,450 hike in its average rental price.
According to the report, the average rental price in the Western Cape for the second quarter was R10,673, keeping its place as the province with the highest rental prices for eight consecutive years.
The Western Cape has remained attractive to South Africans who have been semigrating to the province. Smuts said this contributed to the sharp increase in rental prices.
“Year-on-year growth now appears to be accelerating in the province, reaching 11.7% in June, which was the fastest recorded in the Western Cape since December 2017. The average rent is now almost R1,000 more than in Q2 2023,” she said.
In the same period, the Northern Cape had the second most expensive monthly rental prices in the country at R9,412. While this was the case, Payprop found that the province had the second lowest rental growth at 2.1%.
“That’s an improvement on the previous quarter when it barely stayed in positive territory at 0.5%, but it continues a year of sluggish growth,” she said.
Meanwhile, Payprop found Gauteng to have the third most expensive monthly rentals for residential units, which increased from R8,691 over the same period in 2023 to R9,018 in 2024.
Despite some property firms expecting a boost in demand for property in KwaZulu-Natal’s coastal areas after the formation of a new provincial government, the province’s residential rental market performed poorly in Q2 2024. It recorded a 1.5% rental growth, making it the lowest of any province.
“Rents grew by just R128 year-on-year, reaching R8,945. KwaZulu-Natal has been one of the net losers from South Africa’s semigration trend, reducing demand for rental homes,” said Smith.
However, comparing its performance to the same period last year, she said this quarter’s low growth was still higher than that of the previous two quarters, which could signal some recovery in the province’s property market.
In contrast, the North West had the lowest rental prices in the country after seeing a consistent increase in its rental costs between September 2024 and March 2024.
Smith said the average monthly rental in that province was now R6,362 which is an increase from R5,985 in the same period last year.
Economists expect the South African Reserve Bank to reduce the repo rate by 25 basis points in September, which should boost the property market.
“Rate cuts would lower bond payments and potentially draw more first-time homebuyers back to the market, reducing demand for rental properties,” she said.
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