South Africa’s rental market saw a notable rise in vacancy rates during the second quarter of 2024.
Story Summary:
- National residential vacancy rates rose to 6.72% in Q2 2024, impacting both lessors and lessees.
- Lower-income rental bands are most affected, with vacancy rates nearing 11%.
- Lessors may face extended vacancy periods, while tenants could see more options but higher costs.
South Africa’s rental market report for Q2:2024 – Here’s what you must know
According to the TPN Residential Vacancy Survey, national vacancies climbed to 6.72%, marking a sharp increase from 4.42% in the first quarter.
As economic pressures continue, both property owners (lessors) and tenants (lessees) are grappling with a shifting landscape.
Vacancy rates soar: A warning for lessors
The most concerning finding of the report is the surge in national vacancy rates, particularly in coastal provinces like KwaZulu-Natal (17.61%) and the Eastern Cape (12.94%).
For lessors, this rise presents a challenging market dynamic, as an increasing number of properties remain unoccupied.
In regions like KZN, the combination of oversupply and weakened demand creates a perfect storm for landlords.
What does this mean for lessors?
Higher vacancy rates could lead to lower rental income and longer periods of unoccupied properties, making it vital to reassess pricing strategies or offer incentives to attract tenants.
While the report suggests that interest rate cuts may stabilise demand in the future, lessors must focus on tenant retention and property upkeep in the short term to remain competitive.
Implications for tenants: More options, but higher costs?
While rising vacancy rates might seem like good news for tenants—since more availability often leads to better rental deals—tenants still face challenges.
The economic pressure cited in the report suggests that many households are struggling to meet rental obligations, especially in the lower-income segments.
Vacancies in the lower rental bands (R3,000 or less) surged to nearly 11%, indicating growing financial strain on low-income tenants.
Mid-range rentals (R4,500 to R7,000) also saw an uptick in vacancy rates, climbing from 4.92% to 6.1%.
For tenants, this could mean that while there are more properties to choose from, landlords may pass on economic pressures by increasing rents or demanding stricter payment terms.
The pressure on affordability might limit the ability of tenants to negotiate better deals despite the oversupply.
What vacancy rates suggest about South Africa’s rental market
Surprisingly, the report does not specifically mention the Western Cape, which is often a focal point of the rental market due to its high demand and property values.
However, based on past trends, Cape Town typically experiences lower vacancy rates compared to other regions.
If this trend continues, landlords in the Western Cape may not be as affected by the national spike in vacancies.
Elsewhere, the luxury rental market (R12,000 to R25,000) was least impacted, with a slight increase in vacancy rates from 3.57% to 4.52%, indicating continued demand for high-end properties despite economic strain.
However, this doesn’t mean that luxury property owners can rest easy; it is still essential to focus on offering value through premium amenities or services.
On the flip side, low-income and mid-range rental properties are experiencing the most strain.
Lessors in these segments may need to consider offering flexible payment plans or reduced rental rates to ensure steady occupancy, while tenants should be mindful of rising living costs.
Both lessors and lessees face uncertainty as economic pressures weigh heavily on the rental market.
The report predicts that as interest rates drop and inflation cools, more tenants may consider homeownership, potentially lowering rental demand further.
However, in the immediate term, tenant retention and affordability will likely be the top priorities for both parties.