Tenants in the Western Cape pay more for their living space than in any other province in South Africa
The Western Cape remains the most expensive province in South Africa in which to rent a home, with an average monthly bill of more than R9 000.
This rate beats that of the Northern Cape, the province with the second highest average rental by almost R1 000 a month, the PayProp Rental Index has disclosed.
The good news for Western Cape tenants is that 2018 yielded the lowest growth figures for the provinces, with rents increasing by less than 4% in the last three months of the year. By comparison, the average rent in the Free State increased by more than 8%.
The PayProp Index shows rental changes in 2018 were:
- Western Cape: +3.96%
- Northern Cape: -0.7%
- North West Province: -0.09%
- Mpumalanga: +4.74%
- Limpopo: -4.01%
- KwaZulu-Natal: +7.25%
- Gauteng: +4.84%
- Free State: +8.25%
- Eastern Cape: +3.39%
Nationally, rental growth slowed to 4.14% in the final quarter of 2018, which is lower than the 5.39% increase recorded over the same period in 2017, says Johette Smuts, head of data and analytics at PayProp.
Nevertheless, it was the first quarterly uptick in the rental growth rate in two years, and also the highest quarterly year-on-year growth for 2018. The average national rental is R7 610, pushing rents into the R7 500 to R10 000 bracket, which is still the most populous in South Africa.
A third of all tenants rent in this bracket. But whether Q4’s uptick in year-on-year growth is the start of a recovery “remains to be seen”, Smuts says. “Most provinces saw lower rental growth and a deterioration in the average tenant’s financial situation from 2017 to 2018.
“Below-inflation income growth has also made it increasingly difficult to keep up with debt and other costs.” Despite this, Michael Bauer, managing director of property company SAProperty.com, believes the rental market in Cape Town is currently in a “state of flux”, and that tenants are possibly in a better position, in terms of value for money and the choice available to them than ever before.
This could be for many reasons, he says, including that there is now an excess of rental properties on the market owing to the rise of AirbnB.
“In addition, many bodies corporate and Home Owners Associations dislike short-term lets because of the security risks they might impose and the higher number of people who have access to their building,” Bauer says.
This means many landlords have put their units back on the market as longer-term lets, which has created an increase in the number of units available in supply. Furthermore, research from TPN indicates that the average tenancy period has increased to 18 months, and the average age of tenants is 32.
Paul Stevens, chief executive of Just Property, says this shows that fewer people are entering the rental market and the majority of those who are, rents for less than R7 000 a month.
“The short-to-medium term opportunities for property investors and landlords, therefore, lies in properties that allow for multi-generational living and in properties that can be rented for R3 500 to R7 000 a month.” Exacerbating matters is the increasing delinquency rate of tenants, he says.
And along with this comes decreasing rental recovery rates. Stevens advises that for the upcoming year, landlords should screen and manage their tenants “more carefully than ever”.
Rentals by province
Average 2018 rents by province: (2017 rents in brackets)
◆ Eastern Cape: R5 703 (R5 516)
◆ Free State: R5 942 (R5 490)
◆ Gauteng: R8 064 (R7 692)
◆ KwaZulu-Natal: R8 129 (R7 580)
◆ Limpopo: R7 173 (R7 472)
◆ Mpumalanga: R7 248 (R6 919)
◆ North West Province: R4 986 (R4 990)
◆ Northern Cape R8 153 (R8 211)
◆ Western Cape R9 124 (R8 777)
Get in with the bureaus
Many South African tenants do not have their rental payment histories reported to the credit bureaus, which is to their disadvantage, says Rudi Botha, chief executive of bond originator BetterBond.
This is because rent is a major monthly expense and the omission of that history could cost them their dream home in the future.
“Recent research by one of the biggest credit bureaus found only about 50% of tenants’ rental histories were being reported – and the credit scores of 80% of tenants improved when rental payment records were included in the calculations.”
“This is why it is important to rent only through a professional agency with systems in place to automatically report rental payments to a specialist credit bureau – such as PayProp or TPN – or from a private landlord who participates in an official rental reporting programme,” Botha says.