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Rental Market on the up?

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Renting and leasing out property in South Africa has definitely seen its ups and downs. The previous two years of economic stifling "thanks to a global pandemic" has had some interesting effects on the overall market share. From relative highs in the buyer's sphere to almost rock bottom figures shown in the renting space, one thing is for certain. The only way forward is up.

And while we can say that the former half of 2021 was a trying time for renters, the second half is definitely showing signs of improvement. Ahead, we take a closer look at the current market standing for renting property and what to expect from this recovery.

The marginal increase shows signs of a positive future

Referencing the latest PayProp index, the rental scene has definitely marked a short-term increase for the end of Q2 2021. The figures show that growth comes in at around 0.4%. This follows from the recorded 0.5% growth in Q1 with average renting prices increasing slightly from R7746 in 2020 to R7778 for 2021.

Despite a positive uptick, rental growth still remains under marginal pressure due to lowered interest rates. People are using this window of opportunity to buy a home instead of renting. This, coupled with uncertainty in the economy, has been pushing people to accrue tangible assets like property in order to secure their financial wellbeing.

This decreases how many available tenants there are, which ultimately puts pressure on the rental sphere. Coupled with recent inner-city developments, we see further saturation of the supply of rental property.

Improvement on arrears metrics

While we can certainly see how the renting sphere has suffered, the reasons behind its recovery may not be as clear.

One important factor pertaining to this uptick may lie within renters themselves. During the initial shock of lockdown in 2020, many tenants were left jobless. This meant that almost 1 in 4 of every person renting ended up falling behind in payments.

These payment metrics are tracked as arrears and as time has gone by, these metrics have definitely improved as more and more tenants are able to catch up with payments.

With vaccine rollouts and a general trend back towards normality, the finances of both landlords and tenants are starting to improve. By the end of Q2 in 2021, only 20% of tenants remained in arrears.

This positive collection of data brings us back to where we stood pre-lockdown and shows that the existing rental scene is recovering and aligning with more conventional statistics.

Regional statistics

While a national analysis may give us a vague still shot of the current market trends. Breaking down the numbers by regional figures gives us a broader understanding of how these figures differ across the provincial lines.

While the Western Cape is infamous for being the most expensive province for tenants, the stats are showing an increase from a steady decline of four consecutive quarters. On average, rent has increased by a nominal 1.8% showing that the structure has increased from R9 022,00 to R9 185.00.

On the flip side, Gauteng has experienced the opposite. For four consecutive quarters in a row, tenants are now paying 0.6% less, from R8 344,00 in Q2 of 2020 to R8 292,00 in Q2 of 2021.

And finally Kwa-Zulu Natal. Despite being the epicentre of the recent civil unrest, the province continues to show steady growth. Rental rates have increased by 2% from one year prior from R8 036 in 2020 to R8 200,00.

Not only does this now make KZN the third-highest province in terms of cost to tenants, but it also means that KZN experienced the 2nd highest amount of growth from the last fourth quarter.