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Western Cape has highest rent escalation, after Northern Cape

A quarterly survey of landlords and property managers by TPN in Q42015 to gauge supply and demand, found Cape Town reflected the most noticeably buoyant rental activity of the major metropoles with 91.22% of respondents indicating demand was strong and 48.65% indicating supply as weak. This helps explain the high escalation of 9.96% in the Western Cape.

Johannesburg, on the other hand, also has strong demand (70.99%) for rental accommodation, but the area is also supported by a fairly strong supply of rental stock as indicated by 41.60% of respondents – probably explaining why rental escalation in Gauteng is only 3.98%. Remarkably, only 8.78% of participants described supply of rental stock as weak.

Best tenants live in the Western Cape

Photo by Brent Smith

Besides the highest level of rental stock constraints after the Northern Cape, the Western Cape also had the best performing tenant payment behaviour, the Rental Monitor found. This has given rise to the highest rent (R6,760 per month) after the Northern Cape (R7,442.94) across the provinces.

In contrast, Gauteng still has strong to average rental stock and low escalation. But this has helped pull the province from below average rental payment performance, to a much healthier good standing situation. In essence, landlords have lost out on higher escalation and higher rentals, but their ability to collect rent consistently has improved.

Rent escalation in Q42015 averaged 3.21% nationally. By province, in descending order, rental escalations were: Northern Cape (12.91%), Western Cape (9.96%), Free State (9.15%), KwaZulu-Natal (5%), Gauteng (3.98%), Eastern Cape (2.68%), Mpumalanga (0.61%), North West Province (-4.21%) and Limpopo (-11.84%).

Northern Cape boasts highest average rental

Photo: RE/MAX

A house in the historic city of Kimberley, Northern Cape.

The national average rent recorded was R5,927.48. By province, the Northern Cape led (R7,442.94), followed by the Western Cape (R6,759.75), Gauteng (R6,336.21), Mpumalanga (R6,135.74), KwaZulu-Natal (R6,096.73), Limpopo (R5,546.33), Free State (R5,244.07), Eastern Cape (R5,120.01) and North West (R4,665.55).

TPN categorises tenants into five rental brackets, with the majority of tenants (81%) renting for below R7,000 per month.

There are distinct differences in good standing of tenants in various rental brackets. For instance, the lower income (<R3,000 per month) and luxury income (>R25,000) segments remain the most challenging from which to collect, while the statistical “sweet spot” is in the affordable income (R3,000 to R7,000 per month) and middle income (R7,000 to R12,000 per month) range of rentals.

TPN notes that the number of tenants who “Paid on Time” in middle-income rentals (R7,000 to R12,000 per month) are at 75% vs 54% for luxury rentals (>R25,000 per month). Also, tenants in the “Did not Pay” category for middle income rentals are currently at 4% vs 9% in low-income rentals.

Good standing ranges widely between 77% for the luxury rental segment, to 88% for middle-income tenants. Tenants in the luxury market have taken the biggest dip in good standing, from 86.31% in mid-2013 (prior to interest rate hikes) down to the current level of 77.47%.170316 TPN RM Graph 9 170316 TPN RM Graph 5 (1) 170316 TPN RM Graph 10 170316 TPN RM Graph 8 170316 TPN RM Graph 7 170316 TPN RM Graph 6 170316 TPN RM Graph 4 170316 TPN RM Graph 1


Alison Goldberg is the former property editor of Business Day (1985) and the Financial Mail (1991-99). In 1995 she won the Sanlam Financial Journalist of the Year Award. She has edited such titles as National Constructor and The Miner in Australia and has freelanced for The Star, The South African Jewish Report and The Jerusalem Post.

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