The Eastern Cape and KwaZulu-Natal lead the field in residential rental vacancies for the year's second quarter.
Empty units in the Eastern Cape reached 12.94%, marking an increase of 9.4 percentage points from Q1.
In KZN, where 17.61% of residential units were vacant in Q2, the increase was 11.2%.
This is according to TPN Credit Bureau's latest quarterly report.
The firm, which supplies data and services to the residential and commercial property sectors, surveyed Gauteng, Western Cape, KZN and the Eastern Cape.
It said although the national average of vacancies has also increased, the rise (from 4.42% to 6.72%) is small in comparison.
Comparing year-on-year (Q2 2023 and Q2 2024) vacancies, KZN and the Eastern Cape again rose, while Gauteng and the Western Cape reported fewer vacancies to align with the national average — a decline from 7.27% to 6.72%.
Despite the uptick in vacancies during the second quarter, the first half of 2024 showed the lowest average annual national vacancy rate since 2016.
The average annual vacancy rate for the first half of 2024 was 5.57%, down from about 6.7% for the same period last year.
The higher vacancy rates reflect fluctuating supply and demand, economic pressures and evolving consumer behaviour, said TPN's Waldo Marcus.
He attributed the Eastern Cape rise in empty rental units to a combination of increased supply and falling demand.
The vacancy rate in Gauteng climbed to 7.99%, up from 4.3% in Q1. This figure places the economic hub of SA above the national average vacancy rate of 6.72%.
In the Western Cape, investors saw vacancies increase from a low of 1.51% in Q1 to 2.33% in Q2.
The aggregated supply rating dropped from 44.46 to 41.46 points, indicating a reduction in supply from Q1.
Rental value bands
Vacancy rates increased across all rental value bands, with significant shifts in the lower segments due to reduced demand and economic pressures.
Vacancies rose sharply in the R4,500 bands, but remained below the national average in the R4,500 to R12,000 range, where demand held steady.
The luxury rental market, for properties with rental values between R12,000 and R25,000 per month, continued to have the lowest vacancy rate (4.5%), largely due to a reduction in supply and strong demand, the report said.
Overall, the rental market reflects varying degrees of resilience across the different segments.
In the R3,000 per month or less category, vacancies jumped from 4.51% in Q1 to 10.97%.
This increase is attributed to reduced student occupancy, unemployment and workforce migration.
SA’s official unemployment rate rose to 33.5% in Q2.
“Rental escalations earlier in the year impacted occupancy rates, particularly in the lower rental value bands,” said Marcus.
However, he added, an increased vacancy rate between Q1 and Q2 is not uncommon as it reflects properties under shorter-term leases occupied during the end of the festive season, and the take-up in student accommodation in the first quarter to temporarily boost occupancy rates in the lower rental value bands.
“Property owners have reported some students vacating their rental property early due to financial or academic challenges, leaving units empty,” he said.
Market strength
The TPN Market Strength Index, which measures perceived supply and demand in the rental market, increased slightly from 59.66 points in Q1 to 60.36 points.
A reading above 50 points indicates that rental demand outpaces supply.
In Gauteng, the index was stable at 51.03 points, as both supply and demand decreased at the same rate, with a supply rating at 64.58 and demand at 67.63.
Notably, demand for rental properties in Gauteng has outstripped supply for two consecutive quarters, indicating some positive momentum in the market.
In the Eastern Cape, the index dropped from 58.33 to 56.9 points. In KZN, it fell from 58.33 to 55.42.
According to the report, in the short to medium term, well-managed rental properties were expected to remain occupied and in demand, but expectations that the SA Reserve Bank will implement more interest rate cuts after announcing a 25-basis point cut to 8% earlier in September (the first repo rate cut in four years) suggests a potential turning point.
Lower interest rates and a lift in consumer confidence could result in increased purchasing activity in the property market.
This shift could increase in rental property supply due to more investments in the market, and a potential decline in rental demand as more consumers shift from renting to buying, the report said.
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