Rental trends in 2022 | 'Improved tenant payment behavior as churn drops'

The last two years have been some of the toughest ever experienced in South Africa's rental market. Pandemic-driven pressure saw tenant churn and vacancies climbing, tenant reliability and rental collections dropping, and already-slow average rental escalation entering negative territory.
Vacancy rates at the height of the pandemic were over 13% during December 2020 and in the first half of 2021. However, they dropped to 10.66% in the third quarter of 2021, according to the TPN Vacancy Survey for the fourth quarter of 2021.
Civil unrest in July 2021 resulted in a sharp rise in unemployment with a total of 660 000 jobs lost in the third quarter of 2021. This resulted in reduced demand for rental property, reveals Michelle Dickens, CEO of TPN Credit Bureau.
Despite less-than-ideal circumstances, the last half of 2021 showed the first signs of light at the end of the tunnel. Tenant payment behavior improved, churn dropped, and vacancies began to trend downwards. 

A closer look at the provincial breakdown of the Vacancy Survey

Tenant demand for rental property in Gauteng is back to pre-pandemic levels at 57.21%, supported by 66% of households who receive a salary as their main source of income.

"Gauteng is home to nearly half of all tenants in South Africa with 2.8 million households renting in this booming province," reveals Dickens.

However, the supply of rental property in Gauteng remains stubbornly high with a supply rating of 74.77. "For Gauteng landlords, this translates to an over-supplied rental market with a market strength index of 41.22," says Dickens. "Although this is an improvement from the 39.31 recorded in the third quarter of 2021, an over-supplied market means the vacancy rate remains high at 11.9%."

Western Cape, the second largest province hosting 738 000 tenanted households, is the province with the highest level of salaried households at 68%.

According to Dickens, tenant demand in Western Cape is improving at a rate of 63.01 coupled with an improved supply rating of 59.16. "This puts Western Cape back in the positive position of excess demand for rental property with a market strength index of 51.93," says Dickens. "Western Cape landlords benefited from the improvement in tenant demand with the province's vacancy rate declining from its high of 14.38% in the second quarter of 2021 to 11.4% in the fourth quarter of 2021."

KwaZulu-Natal has 664 000 households in rented accommodation. Households in this province rely equally on salaries and social grants. A total of 9.34% of rental properties were vacant in the fourth quarter of 2021, driven by a deteriorating demand rating of 56.34 and a slightly increased supply rating of 57.04, causing the market strength index to slip into excess supply territory with a rating of 49.65.

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