The Northern Cape province is threatening the Western Cape province as South Africa’s most expensive residential rental market. According to the Rental Index released by property management platform PayProp, residential rental prices in the Northern Cape have increased for the fourth consecutive quarter. Rental prices in the province increased by 10.2% in the first quarter of 2023, to an average of R9,248 per month.
While the Western Cape remains the most expensive province for renting a home, with average monthly rentals of R9,872 during the same period, the rate of rental growth has been much slower. The Western Cape’s growth rate of 5% is in line with the national average of 4.2% and is comparable to growth rates in the Eastern Cape, KwaZulu-Natal, and Mpumalanga.
According to Johette Smuts, PayProp’s head of data and analytics, if the Western Cape’s above-average growth continues, rental prices could reach five figures by the end of the year. However, the Northern Cape’s consistent growth over the last four quarters suggests that it will soon challenge the Western Cape for the top spot as the most expensive rental market.
Provinces such as the Free State, Gauteng, and North West, on the other hand, experienced negative or below-average rental growth. According to PayProp data, tenants in these areas remained on top of their rental payments despite rising living costs.
According to the report, the proportion of tenants in arrears has changed little, with 18.3% in Q1 2023 compared to 18.1% in Q4 2022. However, two provinces were primarily responsible for the national quarter-on-quarter increase in tenants in arrears. The Free State’s percentage of tenants in arrears increased from 22.3% to 26.7%, making it the province with the highest percentage of tenants in arrears. Similarly, the North West saw a significant increase from 16.3% to 22.8%, showing the largest rise in this metric.
Despite relatively stable rental defaults in the first quarter, PayProp predicts that tenant affordability will remain a concern as consumers face rising cost pressures. Tenants in South Africa are reportedly spending nearly a third of their income on rent, and rental expenses for those earning more than R10,000 are rising faster than incomes in the same quarter last year. Rising rents and debt repayments continue to put pressure on tenants’ ability to pay their rent.
Tenants who have successfully managed their expenses, on the other hand, continue to rent as rising interest rates make homeownership less affordable, resulting in increased demand for rental properties.