Real Estate Investor Magazine South Africa March/April 2019 | Page 46

MANAGING
Going Up?
SA rental growth experiences uptick
for the first time in two years
T
he PayProp Rental Index has revealed that nationally,
rental growth slowed to 4.14% in the last quarter of
2018, vs. 5.39% over the same period in 2017. Nev-
ertheless, 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.
At R7,610, the average national rent moved into a higher
rental bracket in Q4, from the R5,000 –  R7,500 category
to the R7,500 – R10,000 category. The R5,000 – R7,500
bracket is still the most populous in South Africa, comprising
approximately a third of all rentals.
“Whether Q4’s uptick in year-on-year growth is the start
of a recovery remains to be seen,” says Johette Smuts, head
of data and analytics at PayProp. “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.”
Smuts says net income levels have been stagnating for some
time, increasing by only 1.56% between Q4 2017 and Q4 2018.
With rent and inflation increasing at higher rates, consumers
are struggling to keep up. “As for tenants’ debt-to-income
ratios, tenants paid R13,756 on monthly debt repayments  in
Q4 2017, vs. R15,031 in Q4 2018,” says Smuts. “This increase
in turn affects affordability ratios. And as incomes have grown
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MARCH/APRIL 2019 SA Real Estate Investor Magazine
more slowly than rents, the slight increase we measured in the
rent-to-income ratio was to be expected.”
In Gauteng, the average rent breached R8,000 for the first
time in Q4 2018. This is 4.84% more than the year before – the
third highest growth rate in the country for the quarter. While
this rate was lower than the year before, it was the province’s
first increase in quarterly growth in two years, which might
signal the beginning of a recovering rental market in the
province.
2018 yielded the lowest growth figures for the Western
Cape since the launch of the Rental Index in 2012. At its
lowest point of the year, growth in the Cape slowed to just
3.96% in Q4. Even so, the average Western Cape rent
surpassed the R9,000 mark during the year, still making it
the most expensive province to live in with an average price
differential of nearly R1,000 compared to the second most
expensive province.
“2018 was a tough economic year for South Africans,
businesses and consumers alike, and it shows in the numbers,”
says Smuts. “The year ahead brings new challenges, such as
the general election, from which we might see fresh political
uncertainty and which in turn could create continued
economic uncertainty and volatility. Just how much that might
affect rental prices remains to be seen.”