In the first quarter of 2024, South Africa’s national rental vacancies reached historic lows, with demand significantly outstripping supply. According to the TPN Vacancy Survey Report, 4.42% of rental properties were vacant, down from 6.69% in the previous quarter, marking the lowest vacancy rate since the survey began in 2016. This shift is attributed to high interest rates, poor employment conditions, stagnant salaries, and political and economic uncertainty, leading more households to opt for renting over homeownership.

Stats SA’s General Household Survey indicates that homeownership fell from 64.4% in 2022 to 62.9% in 2023, while the rental market grew from 22.5% to 23.9% in the same period. The percentage of households occupying properties rent-free remained steady at 13.2%.

The TPN report highlights a highly favorable market for landlords, with the rental market being 9.66 points above equilibrium. The demand rating was 76.85 points, while the supply rating was 57.54 points, reflecting an optimistic outlook. The highest rental value band, between R12,000 and R25,000 per month, had the highest index at 61.56 points.

Investors face high interest rates that increase the cost of financing new developments, but low vacancy rates offer increased security. Despite the benefits, landlords are advised to consider location, rental prices, and the potential for tenant defaults due to constrained household budgets. The Western Cape and Gauteng are identified as the best markets for landlords and investors.

With the South African Reserve Bank maintaining the repo rate at 8.25% and local banks holding the prime lending rate at 11.75%, high interest rates are expected to sustain the preference for renting over homeownership through the second quarter of 2024. The property market had anticipated interest rate cuts, but ongoing economic uncertainties make this less likely.