South Africa's rental market sees strongest growth in years amid economic uncertainty

As South Africa grapples with a continued weak economic outlook, a noteworthy shift is occurring in the residential property market.

The Seeff Property Group has reported that fewer consumers are looking to buy homes, a trend echoed by the latest findings from the PayProp Rental Index.

The Index reveals that the residential rental market in South Africa has kicked off 2025 with extraordinary momentum, recording an uptick of 5.6%, the highest quarterly growth since the third quarter of 2017.

The robust growth was underscored by pushing the average rent to R9 132 across the nation.

Notably, February alone saw a year-on-year rental increase of 6%, marking the most significant monthly growth recorded since August 2017.

This surge comes against a backdrop of improving inflation conditions—Consumer Price Index (CPI) inflation fell from 3.2% in both January and February to 2.7% in March, creating an unprecedented gap of 2.8% between rental growth and inflation during this cycle.

“The resulting gap between rental growth and inflation – 2.8% in both February and March – marks the most significant real-terms rental gain seen in the current growth cycle. Landlords are continuing to claw back losses sustained from the slowdown in recent years, driven by strong tenant demand and broad-based provincial growth,” stated the Index.

“Unlike previous years, Q1 2025 did not bring a seasonal spike in arrears. Instead, the proportion of tenants in arrears edged down slightly to 17.0%, matching the record low first recorded by PayProp in Q4 2023.”

André van Rooyen, head of sales at PayProp, said that after last year’s first-quarter arrears spike, this stable start to 2025 was encouraging.

“That said, with rents rising quickly, it's vital for agents to recheck affordability at lease renewal and make sure tenants can afford escalations,” Van Rooyen said.

Samuel Seeff, chairman of Seeff Property Group, attributed the brisk rental growth to several intertwined factors.

“The rental market has continued to grow for a variety of reasons such as: The continued weak economic outlook and pressure on consumers means that many are still not able to buy their own homes and must therefore continue renting,” he said.

“This is also evident from the fact that despite the lower interest rate (when compared to last year), sales volumes have remained disappointing, and overall for the first 6 months of this year, volumes are down compared to the same time last year.” 

Seeff said that a second key driver of the rental growth was the continued influx of people to the metros – the semigration to the Cape, for example, with many renting before they buy meant that there were more tenants, which have driven up the rental costs.

“For other metros, the Gauteng metros, in particular, there is a continued influx of people looking for economic opportunities, again putting pressure on the rental market, but not necessarily resulting in higher rental prices,” Seeff said.

“A third reason is that the higher demand for rentals has depleted the rental stock, and we see that there is now opportunity again for investors to come into the rental market as they have been doing this year, as shown by mortgage originators such as ooba reporting higher applications for mortgage loans to finance rental investments.”

Professor Waldo Krugell, an economist at North West University, said the strong rental market has to do with the weakness in construction over the past few years.

“Supply has not grown much and there is greater demand. The fact that there was no seasonal spike in arrears reflects the bit of breathing room that consumers have had with lower inflation, lower interest rates, and lower fuel prices,” Krugell said.

“Those positive aspects are not enough to fuel much construction yet, but it does enable households to pay their rent.”

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