TPN Credit Bureau has released its Vacancy Survey for the second quarter of 2023, revealing the most popular rental bracket in South Africa right now.
According to the latest TPN Vacancy Survey, the national vacancy rate – the number of vacant properties – increased from 6.19% in Q1 2023 to 7.27% in Q2, representing a slight year-on-year increase of 0.11% from 7.16% in Q2 2022.
TPN said that the slight uptick in vacancies resulted from consumers acclimating to higher interest rates and adjusting their lifestyles for higher food, fuel, and housing costs.
Nevertheless, investors have seen a healthy recovery since 2020 with improved escalations, lower vacancies and a relative slowdown in new supply coming online, the Bureau added.
It warned, however, that during uncertain times, landlords must continue to balance rental growth with vacancies.
Provincially, the Western Cape retains its position as the province with the lowest number of vacant units. Just 3.62% of residential units are vacant – highlighting the demand for rental properties in the province.
The province also boasts the highest rental Market Strength Index at 66.13 points. Market equilibrium above 50 means a higher demand than supply, allowing investors to escalate rentals.
KwaZulu-Natal continues to experience an increase in the number of vacancies. 2023 saw an increase in vacant units to 10.13% in Q1, which increased further to 12.06% in the second quarter. The province currently has the lowest occupancy rate in South Africa.
Residential property investors and owners in Gauteng can expect an 82.2% occupancy. This is down from the previous quarter but remains below the national average of 92.73%.
Many experts believe that this downturn in demand for rental properties in Gauteng is partly responsible for the strong demand in the Western Cape, as residents semigrate in search of better services. TPN noted that Gauteng has been struggling to reach a market equilibrium, with supply outstripping demand since 2018.
Properties with a rental value of R3,000 to R7,000 had a marginal increase in the number of vacant units from 6.54% in the first quarter to 7.56% in the second quarter. Dissecting this value band in more detail reveals that the lower rental value bands are experiencing higher vacancies.
There has been a sharp increase in the number of vacant units reported for the rental value band R3,000 to R4,500. At the end of the second quarter, the vacancy rate for this rental band entered the double digits with 11% of units vacant.
According to the credit bureau, most South Africans are spending between R7,000 and R12,000 per month on rent. The report showed this rental value had the lowest vacancy rate of any other band, recorded at 5.55% in Q2 2023. However, the report noted that this is a slight increase from the 5.07% from Q1.
Interestingly, the report also showed that The luxury residential rental market – units achieving a rental of R12,000 to R25,000 – has the second lowest vacancy rate at 6.49%.
This rental value band is the only segment that has seen a slight decline in the number of vacancies, down from 7.16% in the first quarter to 6.49% in the second quarter.
“In the second quarter, it recorded the lowest number of vacancies since 2016. This indicates that even those who can afford to purchase property are instead opting to remain in the rental market to avoid a long-term commitment and mitigate against the current uncertainty,” TPN said.