South Africa’s rental market may be booming, but tenants are starting to feel the pinch. With average rents hitting a new record of R9,132 in Q1 2025 – the sharpest increase in nearly eight years – the pressure is now on household budgets, as affordability concerns begin to cloud an otherwise upbeat outlook.
According to the latest PayProp Rental Index, national rental growth reached 5.6% in Q1 – the strongest quarterly increase since Q3 2017. Growth peaked in February with a year-on-year increase of 6%, the highest monthly growth recorded since August 2017.
This robust rise occurred amid a favourable inflation environment, with CPI inflation falling from 3.2% in both January and February to 2.7% in March. The resulting gap between rental growth and inflation – 2.8% in both February and March – marks the most significant real-terms rental gain in the current growth cycle.
“While landlords and agents are benefiting from stronger demand and healthier returns, it’s critical that we remain focused on tenant affordability and long-term sustainability,” says André van Rooyen, head of Sales at PayProp.
Affordability under pressure
One of the most encouraging signs for landlords was the stabilisation of arrears. Unlike previous years, Q1 2025 did not bring a seasonal spike. The proportion of tenants in arrears edged down slightly to 17.0%, matching the record low first recorded in Q4 2023.
“After last year’s first-quarter arrears spike, this stable start to 2025 is encouraging,” says van Rooyen. “That said, with rents rising quickly, it's vital for agents to recheck affordability at lease renewal.”
And affordability may soon become the market’s key stress point. Although inflation remained subdued in Q1, electricity and fuel costs are rising and may push up the broader CPI in coming months. According to PayProp’s State of the Rental Industry report, nearly 80% of agents say tenants are relocating due to affordability concerns.
For now, the average rent-to-income ratio remains manageable at 28.8% – under the recommended 30% ceiling – but landlords of higher-end properties may need to reconsider pricing strategies to avoid narrowing their tenant pool too far.
Growth gaps widen
While the national picture is one of growth, performance varied widely across provinces.
- Limpopo posted a standout 10.9% rental increase, lifting average rent to R8,899 and confirming its position as one of the most dynamic rental markets.
- The Free State more than doubled its Q4 growth rate, climbing to 7.6% and overtaking the Eastern Cape with an average rent of R7,453.
- The Western Cape retained its spot as the most expensive rental province at R11,285, despite growth dipping slightly to 9.6%.
Other provinces showed more modest or concerning trends:
- KwaZulu-Natal recorded a steady but below-average 4.5% growth, with rents just R31 behind Gauteng.
- Gauteng continued its slowdown to 2.9%, raising concerns about its ability to hold third place in rent rankings (currently at R9,201).
- Mpumalanga, the laggard, managed only 1.1% growth – the lowest in the country.
- The Eastern Cape also slipped further in the rankings despite a moderate recovery, and Northern Cape showed signs of improvement with a 3.3% rise after a slow 2024.
Outlook remains cautious
The data signals a rental market with real momentum – driven by strong demand, improving payment behaviour, and favourable macroeconomic trends. But as affordability becomes a growing concern, especially in the face of rising utility costs, the sector’s resilience will depend on how landlords and agents navigate escalations, pricing strategies, and tenant retention.
