Rental Growth

The PayProp Rental Index has been featured in numerous news articles, media outlets, and official publications, highlighting its effectiveness as a decision-support tool. We have summarised the data on rental growth from the first quarter of the South African residential rental market. 

Quarterly trends and rental growth rates

  • In Q1 2024, rental growth in South Africa decreased to 3.8%, which is 0.8% lower than the previous quarter. Despite this decline, the growth rate remains higher compared to corresponding quarters in 2021 and 2022.
  • Year-on-year rental growth showed a consistent decline in early 2024, with rates of 4.2% in January, 3.8% in February, and 3.6% in March. This resulted in an average quarterly growth rate of 3.8%, marking the lowest quarterly increase since Q4 2022.
  • The average rent in South Africa for Q1 2024 was R8 654, which is R301 higher than a year earlier.

Inflation and Economic Context

  • The South African Reserve Bank (SARB) continues to struggle with controlling inflation, which remains at the high end of the 3-6% target range despite high interest rates.
  • Rental growth has been consistently outpaced by inflation, creating a challenge for the SARB. An interest rate cut could reduce economic pressure but might also increase inflation.
  • The SARB, influenced by the US Federal Reserve’s decisions, is unlikely to reduce interest rates soon and may even consider further increases.

Impact on Rental Agencies

  • The gap between rental growth and inflation affects rental agencies’ commission income, as costs rise faster than income.
  • Agencies face a dual challenge: lower rental growth rates and suppressed housing sales due to high interest rates.
  • Despite the current economic pressures, rental agencies have previously navigated periods of lower growth successfully, suggesting they can manage through the present difficulties as well.

In summary, while the rental growth rate in South Africa has slowed down, it remains relatively healthy compared to earlier years. Economic pressures such as inflation and high interest rates pose challenges for rental agencies, but their resilience from past experiences may help them manage these current issues.

To access the full 2024 quart one Rental Index, visit the PayProp website

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