South Africa’s rental market has recovered from the lows of the Covid-19 pandemic as the country’s high interest rates have made buying property far more expensive for many consumers.
This is according to TPN Credit Bureau’s industry principal, Waldo Marcus, who told Kaya Biz that South Africa’s residential rental vacancies declined significantly in the third quarter of this year.
Residential rental vacancies dropped to 6.76% in Q3, down from 7.27% in the previous quarter.
In other words, just under 7 out of 100 residential units in South Africa were vacant during this quarter – the lowest quarter since 2017.
Year-on-year, overall vacancies have decreased by 11.52% on average.
Marcus said this positive trend in the rental market aligns with the overall performance throughout the year, signalling a departure from the challenges the sector faced during the Covid-19 pandemic.
He said one of the key factors contributing to this strength is South Africa’s persistently high interest rates.
Since November 2021, the South African Reserve Bank has hiked the country’s interest rate ten times and by a cumulative 475 basis points.
This has brought the repo rate to a 14-year high of 8.25% and the prime lending rate to 11.75%.
Marcus said these rates put a lot of pressure on property purchases, making ownership significantly more costly.
This is especially true when coupled with the country’s high inflation, rates and taxes, and utility expenses.
Therefore, renting has become a more attractive and viable alternative to property ownership.
In addition, Marcus said consumers are making more informed decisions and balancing their household budgets better to ensure they have some predictability for their household expenses.
He added that property investors are reaping the benefits of this robust rental demand.
Lower vacancies give property investors the space to navigate the pressures of the current economic climate.
While the leeway may be limited, Marcus said investors have the opportunity for investors to gradually increase rental prices, given the sustained demand for rental properties.