A Stronger Rental Market, But Not Without Risk

There is some positive movement in the South African rental market, with rental growth picking up again after three quarters of slowing growth.

According to PayProp’s Q1 2026 Rental Index, national rental growth reached 4.7%, up from 4.5% in the previous quarter. The average national rent increased to R9,582 per month, around R450 more than a year ago.

Gauteng has also gained some ground. Rental growth reached 4.3%, its strongest quarterly performance since Q3 2023, with the average rent increasing by almost R400 year on year to around R9,600.

FNB’s July residential property data showed national rental inflation at  4.1% year on year in June, while vacancy rates continued to decline. FNB expects rental demand to remain relatively firm as affordability pressures make homeownership more difficult and the supply of new rental stock remains constrained.

TPN has also forecast rental escalations of around 4.5% to 5.5% for 2026, citing a shortage of residential rental stock as one of the factors supporting rental growth.

But national averages only tell part of the story.

What are we seeing in Johannesburg?

From what we're seeing at E&Y, certain areas and price bands are performing better than others.

Ferndale is a good example. Our agents are reporting exceptionally strong demand for apartments in the area, with well-priced rental stock moving quickly.

We are also seeing limited new rental stock coming to market in high-demand areas, with similar shortages being reported across the wider industry.

That doesn't necessarily mean landlords should immediately start pushing rentals up significantly.

There is another side to the market that needs to be considered: what tenants can realistically afford.

A good tenant may be worth more than a bigger escalation

Tenants are under financial pressure.

PayProp's latest affordability data shows that tenants were spending around 45.7% of their income on debt repayments in Q1 2026. While slightly lower than a year earlier, it remains a significant portion of household income.

We believe this may be one of the reasons some tenants are choosing to renew their existing leases rather than move. Moving usually means another deposit, moving costs and potentially a higher rental.

For landlords, strong rental demand therefore shouldn't automatically translate into aggressive annual increases.

At E&Y, we generally advise landlords with a good tenant to consider a moderate rental escalation rather than risk losing someone who pays consistently and looks after the property.

Seasoned landlords understand that an extra few hundred rand in rental needs to be weighed against the cost of vacancy, remarketing the property and taking a chance on a completely new tenant.

And finding a financially sound tenant is becoming harder.

More rental applications are being declined

Over the past few months, we've noticed an increase in rental applications being declined, particularly because of affordability concerns and poor credit scores.

This is where the apparent strength of the rental market can become misleading.

Demand may be high, but that doesn't mean every person enquiring about a property is a suitable tenant.

PayProp reported that the proportion of tenants in arrears fell to a record low of 16.7% in Q1 2026. However, those tenants who were behind owed an average of 74.3% of one month's rent, up from 71.3% in the previous quarter.

For us, this reinforces the importance of screening properly before a tenant moves in.

Our screening includes bank statements, affordability checks, TPN credit and rental payment history, employment verification and previous landlord references. Where an applicant is a foreign national, we also make sure the appropriate supporting documentation is in place.

One of the biggest risks a landlord can take in the current market is rushing to fill a vacant property and accepting a tenant who hasn't been properly screened. A month's vacancy can be painful. A tenant who stops paying and has to be legally evicted can be considerably more expensive.

Keeping arrears low starts before the rent is late

Screening is just the first step. Once the tenant has moved in, rent collection needs to be actively managed.

Across the almost 1,500 properties managed by Etchells & Young, our arrears rate in June 2026 was just 1.62%, 10x better than the national average. Our managed portfolio also recorded a vacancy rate of only 3%.

Those figures don't happen by accident.

Our collection process starts before the rent is even overdue.

Tenants receive a friendly reminder before the first of the month. If payment hasn't arrived, further reminders follow in the first few days. If rent remains unpaid, the matter progresses to a formal breach notice, the landlord is kept informed and our Portfolio Managers continue following up by phone and e-mail.

Where a tenant has only made a partial payment, that is followed up too.

We don't simply wait until the end of the month to see whether the tenant catches up. If the breach is not remedied, the matter moves into the formal processes required by the lease and applicable legislation, with the landlord kept involved in decisions around cancellation and, where necessary, legal action.

That early intervention matters. PayProp itself notes that diligent rental agencies and effective arrears monitoring and recovery systems appear to be helping keep national arrears down despite pressure on tenant finances.

What does this market mean for landlords?

Rental growth has improved, vacancy rates are declining and shortages of rental stock are supporting demand. FNB also expects affordability pressures in the ownership market to continue supporting the rental sector.

But this isn't a market where landlords should simply chase the highest rental possible.

Our experience is that the better strategy is to price correctly, hold onto good tenants where possible and be more careful than ever about who you place in your property.

The financial pressure on households means stringent screening and active management have become even more important.

If there is one piece of advice we would give landlords in the current market, it is to use a reputable agency that takes tenant screening seriously and has a proper management and collections process once the tenant has moved in.

Strong rental demand is good news.

A good tenant who pays consistently is better.