6 Key trends driving residential rental property this year.
Category Rentals
The latest rental property barometers from both PayProp and TPN have reported a rather upbeat outlook for the rental market for this year. In particular, rental rates have continued to increase over the last year with PayProp reporting average growth of around 5.4% by the end of 2024, outstripping inflation which averaged 4.4% by the end of the year.
We highlight a few key trends anticipated to drive the residential rental market this year:
Trend #1: Higher real-term rental growth. As can be gleaned from the above, in contrast with prior years, rental growth finally outpaced inflation by year-end with landlords thus achieving real growth for the first time in recent years. Growth ranged between 4.5% to 5% last year, and provided there are no economic or inflation shocks, landlords should enjoy good returns on their rental investments this year.
Trend #2: Lower inflation easing the burden on tenants. Inflation eased considerably in recent months and stands at 3.2% (January). This is notably down from 6% in 2023 and 4.4% in 2024. The expectation is that inflation should remain contained within the 3%-6% target range of the Reserve Bank. The recent rate cuts and lower inflation have provided much needed relief to households, freeing up more disposable income to pay on rent.
Trend #3: Sustained demand, lower occupancy rates. Despite the lower interest rate and potential exit of tenants, TPN expects that rental demand will be sustained this year. According to TPN's rental data, residential vacancy rates have trended down over the last four years with 2024 ending with the lowest national average vacancy rate of 5.07%, and the Cape dropping to just 1.07% by the third quarter of 2024, potentially due to stock shortages.
Trend #4: Tech-enabled rental agents offer a market advantage. Tech-enabled solutions providing holistic tenant and property management solutions now enable legal compliance, and more accuracy and efficiencies for landlords. These automated processes range from tenant vetting to contracts, invoicing, rent collections, reconciliations, and payments, to maintenance and general property management.
Trend #5: Shifting demographics and meeting tenant needs. While most rental markets are still dominated by GenXers and Millennials, GenZs are increasingly moving into the rental market, not just sectional title properties, but also houses. Tenants these days therefore look for more tech-enabled housing, often also with work-from-home spaces, and increasingly pet-friendly. This trend is likely to sustain into the future.
Trend #6: Location, lifestyle and amenities as key drivers of demand. Desirable neighbourhoods will remain those with access to key amenities. Access to employment hubs, schools, shopping and leisure will continue to drive demand for rentals as tenants tend to prioritise convenience. As tenants get older or their lifestyles change, they will then often move from busy urban spots to more suburban or estate properties.
It is expected that on the whole, the Cape will remain the top rental market in the country, likely to achieve higher rental rates and growth, as well as lower vacancies compared to elsewhere in the country.
As leading tech-enabled rental agents, Seeff enjoys market leadership and offers holistic solutions, tailored to the needs of our clients. If you would like to know more about our rental solutions, or would like to discuss your property needs, please feel free to contact me.
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Author: Gina Meintjes
