In South Africa’s dynamic property market, the middle-income bracket is emerging as a prime target for investors. This insight is based on recent findings from the Residential Rental Monitor Q3 2023 and PayProp Rental Index 2023, which highlight the growing potential of this sector.
Key observations include a reduction in tenant defaults and an inclination towards higher rental bands. This indicates a maturing market populated by responsible tenants. Notably, regional differences are crucial; some areas exhibit lower vacancy rates and heightened demand for rentals, presenting opportunities for stable income and growth. And taking in consideration rental escalations across various bands offer further guidance on market trends, aiding investors in making informed decisions. See more below:
Sources: TPN Credit Bureau. Residential Rental Monitor 2023 Q3
The rental bracket of R7,000 – R12,000 shows an above average market performance and in the green across all categories of market size, good standing, vacancy rates and escalations.
A tenant is deemed in good standing if they meet all rental obligations by month’s end, whether they pay on time, within a grace period, or late but before the month’s end. According to the Residential Rental Monitor Report tenants in the rental bracket of R7,000 – R12,000 top the good standing charts.
Sources: TPN Credit Bureau. Residential Rental Monitor 2023 Q3
Timely rental payments are crucial for investors. Properties with rental prices between R7,000 and R12,000 per month have shown impressive performance, with 76.62% of tenants paying their rent on time.
In contrast, the highest frequency of late payments occurs in the R3,000 to R7,000 rental band, where 12.41% of tenants are late. Following this is the luxury rental segment, with properties over R25,000 per month experiencing 11.56% late payments.
Sources: TPN Credit Bureau. Residential Rental Monitor 2023 Q3
The middle-income property market, particularly in the R7,000 to R12,000 rental range, has become an attractive investment option characterized by strong and consistent demand, low vacancy rates, and reliable tenants, this sector offers significant above-average rental growth.
This sector has seen an increase in tenants and a rise in national average yield in 2023 highlighting its robust potential in regions with established demand and stability.
Moreover, this market uniquely balances affordability with quality, presenting investors with a well-rounded opportunity that blends risk reduction with the prospect of substantial returns.
