South African rental arrears hit all-time low

Source: Pexels

This improvement in tenant payment performance underscores the resilience of managed rentals, even as the market shows signs of cooling. Residential rental growth slowed to 5.0% year on year after a strong start to the year, while average rent rose to R9,218 – an increase of R433 compared to the same quarter in 2024. Importantly, rental growth continued to outpace inflation, keeping landlords in positive territory in real terms.

“Rental growth above inflation and arrears at record lows are strong signals that the market remains healthy,” says Andre van Rooyen, head of Sales at PayProp. “Even with signs of cooling, landlords and agents can be confident that tenants are still able to meet their commitments.”

The question now is where rental growth will go in Q3. Average year-on-year rental growth slowed from 5.2% in April to 4.5% in June, the lowest monthly figure recorded since May 2024.

“One of the key drivers of the strong growth we’ve seen over the past year was landlords and agents making up for low or negative growth during the pandemic,” says van Rooyen. “Now, after four consecutive quarters of real-terms growth, many may feel less urgency to push rents higher.”

Big markets slow, smaller provinces surge

The dip in national rental growth in Q2 was largely driven by slower performance in South Africa’s three largest rental markets. Gauteng recorded sluggish year-on-year growth of just 2.4%, while KwaZulu-Natal grew at 3.6%. Growth in the Western Cape was still well above average at 7.3%, but even so this was down from 9.6% in Q1. Together, these provinces’ slowing growth weighed down the national average despite continued strength elsewhere.

By contrast, smaller markets continued to post robust growth. Limpopo led the country for the third consecutive quarter with an extraordinary 12.5% year-on-year increase, pushing average rents in the province to R9,145, just R127 behind KwaZulu-Natal. If current trends continue, Limpopo could soon overtake KZN and even Gauteng to rank among the three most expensive provinces for tenants.

Residential Property

What South Africa can learn from failed rent control policies worldwide

18 Aug 2025

Average rents in the Northern Cape also surged past the R10,000 mark for the first time, as the province posted strong 7.3% growth and cemented its place as the second most expensive province after the Western Cape.

Elsewhere, the Eastern Cape extended its recovery with 5.7% growth, while the Free State delivered a healthy 7.7% despite a small quarter-on-quarter dip in rand terms. Mpumalanga remained the weakest market, with growth almost flat at 0.1% year on year. The province has now experienced rental growth below 1.0% in three of the past four quarters, underscoring ongoing pressure on the local market.

Arrears reach historic low

Despite the slowdown, there was positive news on arrears. The share of tenants in arrears fell to 16.9% in Q2, the lowest ever recorded in the PayProp Rental Index. Tenants in arrears now owe 73.7% of their monthly rent, breaking the previous record low set in Q3 2023.

Tenant finances have remained resilient despite rising fuel and electricity costs earlier in the year, aided by low overall inflation. This, coupled with slower rental escalation, reduces the risk that rent levels will become unsustainable. However, the average rental applicant is now spending more than half of their income (52.1%) on debt repayments, which could affect their financial resilience.

Van Rooyen says that while national growth may ease further in the coming months, record-low arrears point to a rental market on solid ground. “South Africa’s rental sector is showing resilience, with tenants continuing to meet their obligations even as growth patterns shift,” he says.

“For property professionals, the message is clear: use data to adapt to local conditions. In slower markets, that means digging deeper for opportunities, while in faster-growing provinces, robust tenant vetting will be key to coping with demand and sustaining returns.”