Latest news with #PayPropRentalIndex
IOL News
2 days ago
- Business
- IOL News
South Africa's rental market sees strongest growth as average rental stays above R9 100
The Western Cape continued to attract the highest average rent in South Africa at R11 285 despite a slight dip in growth from fourth quarter of 2024's double-digit figures to a robust 9.6%. Image: Freepik South Africa's residential rental market has kicked off 2025 with a remarkable performance, showcasing the best results in several years. According to the latest PayProp Rental Index, average national rental growth reached 5.6% in the first quarter of this year, marking the strongest quarterly increase since the third quarter of 2017 and pushing the average rent to R9 132. Notably, February saw a staggering year-on-year rental increase of 6%, the highest monthly growth recorded since August 2017, indicating a burgeoning recovery in the sector. This impressive rise comes alongside a favourable inflation landscape as the Consumer Price Index (CPI) inflation fell from 3.2% in both January and February to a low of 2.7% in March. The resulting gap between rental growth and inflation is significant—standing at 2.8% in both February and March—denoting the most marked real-terms rental gain witnessed in the current growth cycle. Landlords are beginning to reclaim losses incurred during previous market slowdowns, spurred by a surge in tenant demand and broad positive growth across provinces. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ In contrast to what has been witnessed in previous years, the first quarter of 2025 did not present the usual seasonal spike in rental arrears. The proportion of tenants reported in arrears actually dipped slightly to 17.0%, matching the record low previously established in the fourth quarter of 2023. 'After last year's first-quarter arrears spike, this stable start to 2025 is encouraging,' said André van Rooyen, head of sales at PayProp. 'That said, with rents rising quickly, it's vital for agents to recheck affordability at lease renewal and make sure tenants can afford escalations.' Despite inflation figures staying subdued, rising electricity tariffs and fuel prices pose potential threats to the overall affordability of renting as the year progresses. Even amidst strong overall demand, nearly 80% of rental agents surveyed in PayProp's latest State of the Rental Industry reported highlighted affordability concerns as a primary driver behind tenant relocations. Currently, the rent-to-income ratio remains manageable at 28.8%, comfortably below the recommended threshold of 30%. Nonetheless, owners of high-end properties may need to strategically adjust their pricing to avoid narrowing their tenant pool excessively. The performance across provinces has been mixed, with some regions soaring ahead while others lag behind. Limpopo continued to shine as one of the fastest-growing markets, recording a stellar 10.9% increase in rents. This surge brought the province's average rent to R8 899, solidifying its position ahead of Mpumalanga and amplifying its influence in the rental landscape. The Free State made a strong comeback, more than doubling its growth rate from the fourth quarter of 2024 to a brisk 7.6%, with average rents now reaching R7 453, allowing it to surpass the Eastern Cape. In contrast, Gauteng and Mpumalanga appeared to be facing challenges. Gauteng's rental growth fell to just 2.9%, the weakest in over a year, raising eyebrows regarding its ability to retain its third-place rank for average rent, which currently stands at R9 201. Mpumalanga showed slight growth at 1.1%, yet it remained the lowest in the country, with a mere R91 increase year on year. Meanwhile, the Western Cape continued to attract the highest average rent in South Africa at R11 285 despite a slight dip in growth from fourth quarter of 2024's double-digit figures to a robust 9.6%. KwaZulu-Natal showcased steady growth at 4.5%, and interestingly, it now sits just R31 behind Gauteng, making it one to watch in upcoming rankings. Northern Cape has emerged positively, with rents rising 3.3% following a lacklustre 2024, while the Eastern Cape showed a modest bounce back to 4.4%, though still retaining the honour of the country's second-lowest average rent. As the economy moves into the next quarter, the data revealseda market filled with potential but also considerable challenges. 'As we enter the next quarter, the data signals a market with real momentum – but also real challenges,' said van Rooyen. 'While landlords and agents are benefiting from stronger demand and healthier returns, it's critical that we remain focused on tenant affordability and long-term sustainability.' BUSINESS REPORT
IOL News
2 days ago
- Business
- IOL News
South Africa's rental market sees it's strongest growth since 2017
South Africa's rental market kicks off 2025 with impressive growth Image: Freepik South Africa's residential rental market has entered 2025 on a high note, exhibiting its most robust performance in years, according to the latest findings from the PayProp Rental Index. In the first quarter of 2025, average national rental growth climbed to an impressive 5.6%, marking the strongest quarterly increase since the third quarter of 2017. This surge pushed the average rent to R9,132, with growth reaching its pinnacle in February, when a year-on-year increase of 6% was recorded—the highest monthly growth since August 2017. This remarkable rental growth coincides with a favorable inflation landscape, as CPI inflation dipped from 3.2% in January and February to 2.7% in March. This falling inflation has created a notable gap of 2.8% between rental growth and inflation during February and March, representing the most significant real-terms rental gain witnessed in the current growth cycle. The momentum has been largely attributed to strong tenant demand coupled with provincial growth, allowing landlords to recuperate losses suffered during recent slowdowns. Stable arrears figures offer cautious optimism Unlike previous years, the first quarter of 2025 did not experience a seasonal spike in rental arrears, with the percentage of tenants in arrears decreasing slightly to 17.0%. This figure matches a record low first recorded by PayProp in the last quarter of 2023. André van Rooyen, Head of Sales at PayProp, said after last year's first-quarter arrears spike, this stable start to 2025 is encouraging. However, he added that with rents rising at a brisk pace, he emphasised the importance for rental agents to reassess tenant affordability during lease renewals. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ While inflation has remained subdued so far this year, rising electricity tariffs and escalating fuel costs pose potential challenges, threatening to influence official inflation figures and, consequently, tenant affordability in the months ahead. The PayProp State of the Rental Industry report revealed that approximately 80% of rental agents report tenant movement driven by affordability concerns. Presently, the average rent-to-income ratio stands at a manageable 28.8%—below the recommended maximum of 30%. However, landlords renting higher-end properties may need to adopt cautious pricing strategies, preventing the limitation of their prospective tenant pool. Provincial performance shows varying levels of growth The growth in South Africa's rental market is not uniform across provinces. In Q1, Limpopo emerged as one of the fastest-growing markets, achieving a remarkable rental increase of 10.9%, just shy of its stellar performance in Q4 2024 and bringing its average rent to R8,899. The Free State showed resilience, more than doubling its Q4 2024 growth rate to 7.6%, pushing its average rent to R7,453 and surpassing the Eastern Cape. Conversely, Gauteng experienced a slowdown in rental growth, dipping to 2.9%, its weakest performance in over a year, and raising questions about its ability to maintain the third position for average rent at R9,201. Mpumalanga also faced challenges, recording the lowest rental growth in the nation at just 1.1%, with rents only rising by R91 year on year. Meanwhile, the Western Cape continues to command the highest average rent in South Africa at R11,285, although rental growth has decreased slightly to a robust 9.6%. KwaZulu-Natal maintained a steady but below-average growth rate of 4.5%, sitting just R31 shy of Gauteng's average rent, suggesting a potential shake-up in future rankings. The Northern Cape has finally shown signs of improvement, with rents rising by 3.3% after a slow performance last year. In contrast, the Eastern Cape's modest bounce back to 4.4% was insufficient to maintain its ranking, landing it the second-lowest average rent in the country. As the market progresses into the next quarter, van Rooyen observes a landscape filled with potential but also challenges, asserting, 'While landlords and agents are benefiting from stronger demand and healthier returns, it's critical that we remain focused on tenant affordability and long-term sustainability.' IOL
The Citizen
29-05-2025
- Business
- The Citizen
Understanding how rental escalations work
The latest PayProp Rental Index revealed that the average rent in South Africa now sits at over R9 000 following a year-on-year rental growth of 5.2% for Q4 2024. This steady rise in rental figures spotlights the importance of understanding how rental escalations work. Whether you're a tenant or a landlord, understanding this concept is key to managing property costs and income effectively. Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, explains that rental escalations are a mechanism designed to keep rent aligned with inflation, market trends, and property maintenance costs. 'The most efficient way to handle rental escalations is to have a pre-agreed annual increase in rent built into a lease agreement. This helps to set tenant expectations up front, avoiding surprise hikes. It also helps both parties plan their financials with predictability,' he explains. There are various ways annual escalations can be expressed in a rental agreement. Typically, the increase amount can either be linked to inflation or could be specified as a percentage, but each lease is different. 'Escalation rates are not fixed by law in South Africa but are negotiated between the tenant and landlord, typically before signing a lease if it is included in the agreement. A standard escalation rate in South Africa ranges between 6% and 10% per annum, though this can vary widely,' Goslett explains. Factors that typically influence the agreed rate include: Inflation rate (CPI): Landlords often base increases on inflation to ensure the rental income keeps pace with cost-of-living increases and property expenses. Currently, inflation is at an historic low of 2.7% (CPI): Landlords often base increases on inflation to ensure the rental income keeps pace with cost-of-living increases and property expenses. Currently, inflation is at an historic low of 2.7% Market conditions & demand : If rental demand is high, landlords may justify higher escalation rates that are above inflation. If the rental market is in the tenant's favour (e.g., high vacancy rates), there may be room to negotiate a lower escalation rate. : If rental demand is high, landlords may justify higher escalation rates that are above inflation. If the rental market is in the tenant's favour (e.g., high vacancy rates), there may be room to negotiate a lower escalation rate. Length of lease: Longer leases may have more moderate escalations to retain reliable tenants. Overly aggressive escalation rates can lead to tenant turnover, which in turn may cost more than the increased income due to vacancies and marketing. As rental prices continue to climb, Goslett emphasizes the increasing importance of understanding rental escalations. 'For tenants, it's about protecting affordability. For landlords, it's about maintaining the value of their investment. With proper awareness and communication, and through the help of a reliable rental agent, both parties can navigate rental escalations effectively and fairly,' Goslett concludes. Issued by: Kayla Ferguson
