While residential vacancy rates increased across all provinces and rental value bands, the Western Cape had the lowest hike in vacancies, according to the Residential Vacancy Survey Report by the credit bureau TPN.
Waldo Marcus, industry p0rincipal at MRI Software and head of marketing at TPN, said the higher vacancy rate reflected fluctuating supply and demand, economic pressures and evolving consumer behaviour.
“Rental vacancies have been gradually increasing since 2018, driven by a growing supply of rental properties, which continued to grow until 2020. Although persistently high interest rates have bolstered the rental market, rental market supply has started to decline as a result of decreasing consumer and business confidence,” he said.
The TPN Market Strength Index, which measures perceived supply and demand in the rental market, increased slightly from 59.66 points in the first quarter to 60.36 points in the second quarter of 2024. A reading above 50 points indicates that rental demand continues to outpace supply.
The improvement in the quarterly index was primarily driven by a decrease in the overall supply rating, which fell from 57.54 to 54.51 points between the first and second quarters.
The Western Cape saw the lowest increase in vacancies (1.51% to 2.33%), a marginal improvement in the rental market strength index and a reduction in both the aggregated supply rating (44.46 to 41.46) and demand (90.48 to 88.07).
Gauteng saw a smaller increase in vacancies (4.3% to 7.99%) with a stable rental market strength index. Demand for rental properties in Gauteng has outstripped supply for two consecutive quarters, indicating some positives.
However there was a sharp rise in the vacancy rate in both the Eastern Cape (up from 9.4% to 12.94%) and KwaZulu-Natal (up from 11.2% to 17.61%), the result of increased supply and decreased demand. The declining market strength indices in both provinces reflected a weakening market momentum, said TPN.
Despite the uptick in vacancies during the second quarter, the first half of 2024 reflected the lowest average annual national vacancy rate since 2016. The average annual vacancy rate for the first half of 2024 was 5.57%, a reduction of 17.21% compared to the previous year.
“An increased vacancy rate between the first and second quarters 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,” Marcus said.
Rental demand dipped slightly from 76.85 points in the first quarter to 75.22 points in the second quarter.
“Interestingly, demand for rental properties remains strong despite the higher vacancy rate in the second quarter,” TPN said.
Vacancies in the lowest value band, R3 000 or less, rose from 4.51% to 10.97% between the first and second quarters, driven by reduced student occupancy, the effects of unemployment and workforce migration.
“Supply in this band is expected to shrink further as rent escalations push properties into a higher rental value category,” said TPN.
In the R3 000 to R4 500 range, a decrease in demand coupled with increased supply led to a rise in vacancies from 6.11% to 7.75%.
“The rental market strength index for this segment weakened, emphasising its sensitivity to economic and employment shifts,” the credit bureau said.
Vacancies increased from 4.92% to 6.1% in the R4 500 to R7 000 band, despite a slight improvement in demand and reduced supply.
The R7 000 to R12 000 band saw vacancies also increase from 4.31% to 5.51% with both demand and supply declining.
“For the third consecutive quarter, the luxury rental market - the R12 000 to R25 000 rental band - maintained the lowest vacancy rate across all segments, experiencing a slight vacancy increase from 3.57% to 4.52%, TPN said.
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