The TPN Residential Vacancy Survey for Q4 2023 indicates a resilient performance in the residential rental sector, mirroring the recovery trend of the preceding quarters.
Factors such as higher interest rates and low consumer confidence have steered many South Africans towards renting rather than owning homes.
Consumer confidence hit a historic low, while consecutive interest rate hikes by the South African Reserve Bank have spurred financial caution among consumers, leading to stricter management of accommodation expenses.
The credit bureau said that ongoing economic challenges, coupled with anticipation surrounding the May 2024 election, have heightened sensitivity to location risks, particularly in areas with governance obstacles.
Waldo Marcus, Industry Principal at TPN said that consumers prioritise safe and well-serviced locations, considering factors such as access to amenities, employment, and security.
Cohabitation among extended family and friends is increasing as a cost-saving measure, while employers' insistence on office returns is expected to boost demand for rental properties near commercial centres.
Despite the mounting cost of living, the residential rental market remains robust, with tenants steadfast in meeting rental obligations. The national vacancy rate further decreased to 6.69% by the end of 2023, marking a notable decline from 2022.
However, disparities exist among rental value bands. Properties valued at R3,000 or less per month witnessed a reversal in vacancy declines, signalling caution for investors due to high supply.
Properties priced between R3,000 and R4,500 maintained above-average vacancies, though showing slight improvement.
Conversely, properties in the R4,500 to R7,000 range experienced increased vacancies, accompanied by a decline in the Rental Market Strength Index.
Meanwhile, the R7,000 to R12,000 band demonstrated a slight uptick in vacancies but retained a healthy Rental Market Strength Index rating.
Rental properties priced between R12,000 and R25,000 experienced a significant decrease in vacancies, resulting in an overall Rental Market Strength Index exceeding 60 points, driven by high demand.
However, perceived supply remains below this threshold, indicating potential opportunities in this segment.
The Western Cape maintains the lowest vacancy rate in the country, with only 3.18% of residential stock vacant at the end of 2023.
Marcus said that the 2024 National Budget, announced in February 2024 by Finance Minister Enoch
Godongwana failed to make inflationary adjustments to personal income tax brackets.
Described as a ‘stealth tax’, this is likely to put further pressure on already financially constrained consumers. This, added to persistently high interest rates and the increased cost of living, augers well for the residential rental market.
However, landlords will need to manage rental increases carefully as they balance tenant affordability with supply and demand, he said.
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