South African Residential rental market is currently experiencing the effects of the COVID-19 economic situation. The latest PayProp Rental Index for Q2 2020 shows the first indications brought on by the pandemic and subsequent lockdown. With unfavourable effects on rental levels, growth and non-payments in the country, as well as widespread household financial pressure – the rental market is likely to follow this trend into the near future.
Data from the PayProp Rental Index reveals a year-on-year decline in growth rates countrywide from Q1 to Q2, while only the North West and Northern Cape experienced a minor increase of 0.1% each. In addition, Limpopo, KwaZulu-Natal, and the Western Cape all encountered negative year-on-year rental growth in the second quarter, with rental prices dropping by 3.7%, 1.6%, and 0.04% respectively.
Undoubtedly, affordability is the largest contributor to the situation in the rental market. With national lockdown affecting employment across South Africa, many households have seen a decrease in their monthly income, and in some cases a total loss of income. The Index shows that many tenants in arrears in May were further in arrears in June. PayProp head of data and analytics Johette Smuts says this has pushed tenants to examine their rental situation and perhaps even downscale.
Inflation statistics throughout the quarter are currently at their lowest in over 15 years, while the current employment conditions brought on by lockdown continue to add financial strain. However, we foresee that in the medium to long-term future rental properties will recover as the economy overcomes the challenges caused by COVID-19 while anticipating that the implementation of Level 2 lockdown should ease some of these pressures.
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Statement by
Richard Gray
CEO Harcourts South Africa