Residential Rental Vacancies Rise in SA Amid Economic Pressures, Says Report
Residential rental vacancies in South Africa increased from 4.42% in Q1 2024 to 6.72% in Q2 2024, according to TPN's Residential Vacancy Survey. KwaZulu-Natal and the Eastern Cape were the hardest hit, with double-digit vacancy increases, while Gauteng and the Western Cape reported lower vacancy rates, consistent with the national average.
Waldo Marcus, TPN's head of marketing, attributed the rising vacancy rates to fluctuating supply and demand, economic pressures, and shifting consumer behavior.
"Rental vacancies have been steadily rising since 2018 due to an increasing supply of rental properties, which peaked in 2020," Marcus explained. "While high interest rates have supported the rental market, decreasing consumer and business confidence has begun to reduce rental supply."
Despite the Q2 2024 vacancy increase, Q1 2024 marked the lowest average annual vacancy rate since 2016, with an average of 5.57%.
Seasonal factors also contributed to the rise in Q2 vacancies, with properties on shorter-term leases and student accommodations driving higher occupancy in Q1 2024. Some students vacated early due to financial or academic challenges, leaving properties empty. Higher rent escalations also negatively affected occupancy rates, particularly in lower-value rental segments.
The TPN Market Strength Index, which measures perceived rental supply and demand, showed a slight increase from 59.66 points in Q1 2024 to 60.36 points in Q2 2024, indicating that rental demand still outpaces supply. However, rental demand slightly dipped from 76.85 points in Q1 to 75.22 points in Q2.
Vacancies by Rental Value Bands:
Under R3,000: Vacancies surged from 1.51% to 10.97%.
R3,000 - R4,500: Increased vacancies from 6.11% to 7.75% due to higher supply and lower demand.
R4,500 - R7,000: Vacancies rose from 4.92% to 6.1%, despite slight demand improvements.
R7,000 - R12,000: Vacancies increased from 4.31% to 5.51%, though demand remained strong.
R12,000 - R25,000: The luxury market saw vacancies rise from 3.57% to 4.52%, maintaining the lowest vacancy rate across all segments.
Provincial Insights:
Eastern Cape: Vacancies jumped from 9.4% to 12.94%.
KwaZulu-Natal: Saw the highest increase, from 11.2% to 17.61%.
Gauteng: Smaller rise from 4.3% to 7.99%, with demand outpacing supply for two consecutive quarters.
Western Cape: Reported the lowest increase in vacancies, from 1.51% to 2.33%.
Looking ahead, Marcus noted that the September interest rate cut and improving consumer confidence may increase property purchases, potentially boosting rental supply while reducing rental demand. However, well-managed rental properties are expected to remain in demand in the short to medium term.
Waldo Marcus, TPN's head of marketing, attributed the rising vacancy rates to fluctuating supply and demand, economic pressures, and shifting consumer behavior.
"Rental vacancies have been steadily rising since 2018 due to an increasing supply of rental properties, which peaked in 2020," Marcus explained. "While high interest rates have supported the rental market, decreasing consumer and business confidence has begun to reduce rental supply."
Despite the Q2 2024 vacancy increase, Q1 2024 marked the lowest average annual vacancy rate since 2016, with an average of 5.57%.
Seasonal factors also contributed to the rise in Q2 vacancies, with properties on shorter-term leases and student accommodations driving higher occupancy in Q1 2024. Some students vacated early due to financial or academic challenges, leaving properties empty. Higher rent escalations also negatively affected occupancy rates, particularly in lower-value rental segments.
The TPN Market Strength Index, which measures perceived rental supply and demand, showed a slight increase from 59.66 points in Q1 2024 to 60.36 points in Q2 2024, indicating that rental demand still outpaces supply. However, rental demand slightly dipped from 76.85 points in Q1 to 75.22 points in Q2.
Vacancies by Rental Value Bands:
Under R3,000: Vacancies surged from 1.51% to 10.97%.
R3,000 - R4,500: Increased vacancies from 6.11% to 7.75% due to higher supply and lower demand.
R4,500 - R7,000: Vacancies rose from 4.92% to 6.1%, despite slight demand improvements.
R7,000 - R12,000: Vacancies increased from 4.31% to 5.51%, though demand remained strong.
R12,000 - R25,000: The luxury market saw vacancies rise from 3.57% to 4.52%, maintaining the lowest vacancy rate across all segments.
Provincial Insights:
Eastern Cape: Vacancies jumped from 9.4% to 12.94%.
KwaZulu-Natal: Saw the highest increase, from 11.2% to 17.61%.
Gauteng: Smaller rise from 4.3% to 7.99%, with demand outpacing supply for two consecutive quarters.
Western Cape: Reported the lowest increase in vacancies, from 1.51% to 2.33%.
Looking ahead, Marcus noted that the September interest rate cut and improving consumer confidence may increase property purchases, potentially boosting rental supply while reducing rental demand. However, well-managed rental properties are expected to remain in demand in the short to medium term.
