South African rental prices are expected to increase significantly in the coming years as a range of factors align in landlords’ favour. Housing inflation, which has been subdued at an average of 2.7% in 2022–2023 and 3.1% in 2024, is expected to accelerate due to mounting cost pressures and a tightening rental market.

The Reserve Bank’s latest Monetary Policy Review highlights that landlords have kept rental prices low to prioritise occupancy rates, a strategy increasingly deemed unsustainable. Rising homeownership costs, driven by elevated interest rates, municipal taxes, and maintenance expenses, have added to landlords’ financial burdens, while pandemic-era shifts have increased rental demand as fewer South Africans purchase property.

Vacancy rates are at historic lows, and rental housing supply is constrained by depressed residential construction activity, further tightening the market. Rental indicators, such as PayProp and TPN data, already show a rise in rental inflation, suggesting a medium-term “catch-up” in prices. This could drive higher core inflation and impact the consumer price index (CPI).

With an interest rate cutting cycle underway since September 2024, economists predict a cumulative 100 basis point reduction by mid-2025, potentially reducing home loan costs and making property purchases more appealing. This development may reignite the rent-or-buy debate, with lower mortgage repayments favouring homeownership against the backdrop of escalating rental costs.

Ultimately, landlords are positioned to capitalise on current market conditions, while prospective tenants and buyers will need to weigh the rising costs of renting against the benefits of owning property in a shifting economic environment.