South African residential vacancies jumped by over 50% between the first and second quarters of 2024, driven by challenges in the lower end of the market and seasonal factors affecting holiday and student accommodations.
According to the latest TPN Credit Bureau vacancy survey report, the overall vacancy rate across all rental categories increased to 6.72% in Q2, compared to 4.42% in Q1.
KwaZulu-Natal and the Eastern Cape recorded the largest increases, but overall, the national vacancy rate for the first half of 2024 remains better than in 2023.
Johannesburg and Cape Town saw lower vacancy rates in line with the national average, while Gauteng's vacancy rate rose to 7.99%, up from 4.3% in the first quarter. The Western Cape saw vacancies rise from 1.51% in Q1 to 2.33% in Q2.
Waldo Marcus, industry principal at TPN, pointed out that the most significant driver of this increase came from the sub-R3 000 rental category, where vacancies more than doubled to 10.97% in Q2 from 4.51% in Q1.
He attributed this to the impact of unemployment and workforce migration on the lower-income market, compounded by rent escalations that squeezed tenants further.
KwaZulu-Natal and the Eastern Cape were particularly affected by seasonal factors, with Marcus explaining that many properties had been occupied in Q1 due to holiday rentals, which were vacant again by Q2.
"That would explain some of the impact that we've seen in KwaZulu-Natal and the Eastern Cape with higher vacancies," he said.
In the Eastern Cape, the vacancy rate surged to 12.94% in Q2, a jump of 9.4 percentage points from the previous quarter. KwaZulu-Natal saw a similar increase, with vacancies rising by 11.2 percentage points to 17.61%.
The R3 000 to R4 500 rental category also saw a notable rise, with vacancies increasing from 6.11% in Q1 to 7.75% in Q2.
This segment of the market was particularly vulnerable to economic and employment instability, with Marcus noting that student accommodation trends played a role, as students often leave their leases due to financial or academic reasons.
Marcus noted that consumers were "under pressure" due to high interest rates, which affected both bondholders and renters. Elevated fuel costs and pre-election uncertainty also contributed to the rise in vacancies.
However, there were some positive signs in the residential rental market. TPN highlighted that the average vacancy rate for the first half of 2024 was 5.57%, a 17.21% reduction compared to the previous year, making it the lowest average annual vacancy rate since 2016.
TPN noted that should the country experience further interest rates cuts and amid increased consumer confidence, the property market is likely to see increased buying activity, potentially leading to more rental properties becoming available and a decline in rental demand as more people transition to homeownership.
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