Experts Weigh In: Key trends shaping South Africa’s Residential Rental Market in 2025

• Real-terms rental growth expected to continue in 2025, with wage growth and lower inflation supporting sustainable rent increases.
• Tech-enabled rental agencies will thrive in 2025, with technology becoming essential for efficiency, risk management, and enhancing landlord relationships.
• Interest rate cuts may not significantly dampen rental demand, as high rates keep first-time buyers renting and construction remains sluggish.

Residential Rental Market in South Africa: What to Expect in 2025

‍As South Africa enters 2025, the residential rental market is showing strong signs of optimism, with key metrics reflecting positive trends.

Rental payment experts PayProp suggest that the market is poised for further growth, but the big question remains: will these trends hold through the year? Michelle Dickens, General Manager at PayProp, highlights three key factors shaping the market in 2025.

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1. Continued Real-Terms Rental Growth

The residential rental market is expected to see continued real-terms growth in 2025. Rental growth in 2024 ranged between 4.5% and 5%, outpacing inflation in the latter half of the year. This trend is projected to persist, especially with inflation expected to stay below 4% for at least the first half of 2025. According to Dickens, "This provides an opportunity for landlords and rental agents to increase rents without negatively affecting affordability."

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Tenant incomes are also improving. The BankservAfrica Take-home Pay Index reported a 2.5% increase in real-term incomes in 2024, with similar growth expected in 2025. This boosts tenants’ financial capacity and supports landlords’ ability to raise rents sustainably.

Furthermore, PayProp’s Q3 2024 data reveals a decrease in tenant spending on rent and debt repayments, giving tenants more financial flexibility and reducing the risk of rent arrears. Dickens notes that “This gives tenants more breathing room and should help reduce the chance of falling into arrears.”

However, rental performance varies regionally. While areas like the Western Cape and Limpopo show strong growth, provinces like Mpumalanga and Northern Cape are still recovering from slower 2024 performance. “Agents should stay attuned to local market trends,” advises Dickens.

2. Tech-Enabled Rental Agencies: A Game Changer

With property sales continuing to struggle due to high interest rates, more agencies are shifting focus to property management, creating a steady income stream from rentals.

Dickens emphasizes, “Property technology isn’t an optional extra in residential rentals anymore; it’s a market reality and priority.” Agencies need to embrace tech to improve efficiencies, enhance tenant vetting, and reduce payment risks.

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“Landlords expect the best and most secure technology solutions when working with their money,” she adds. This tech-driven shift is helping agencies offer more comprehensive services—such as pricing advice, arrears management, and investment strategies—making them valuable partners to landlords. By adopting advanced property management platforms, agencies can build stronger relationships with landlords, ultimately boosting referrals and expanding their client base. “Rental agents will take on a greater leadership role in 2025, to the benefit of both landlords and tenants,” says Dickens.

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3. Interest Rate Cuts Won’t Significantly Affect Rental Demand

Despite forecasts of interest rate cuts to 10.5% in 2025, these reductions are unlikely to drastically change rental demand.

High interest rates have kept many prospective first-time homebuyers in the rental market, and while some may eventually transition to homeownership, “the expected cuts are likely to be modest and won’t significantly cool rental demand,” says Dickens.

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Another factor at play is the continued undersupply of housing. Stats SA reported a drop in approved building plans in 2024, and unless construction picks up, this housing shortage will likely drive rents higher. Dickens concludes, “Unless delivery can be increased, undersupply will continue to push rents upwards.”

Conclusion: Optimism for 2025

The residential rental market in South Africa is set for a positive year ahead. With real-terms rental growth continuing, tenant incomes rising, and technology transforming property management, landlords and agents are well-positioned for success.

While interest rate cuts won’t dramatically shift the demand, the ongoing housing shortage will likely sustain upward pressure on rents. “Rental agents must optimize processes and technology to make the most of the market upswing,” Dickens advises. By understanding regional trends and leveraging technology, rental agents can stay ahead in a rapidly evolving market.

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