Changing Landscape: Rising Tenant Demand in South Africa
South Africa’s housing market is experiencing a significant shift. As property prices soar and interest rates remain elevated, homeownership is increasingly out of reach for many citizens.
This has pushed more South Africans into the rental market, expanding tenant demand across urban and semi-urban centres.
While this transition opens new opportunities for landlords, it also introduces a range of challenges, chief among them, late rental payments and the growing number of high-risk tenants.
Key Drivers Behind the Surge in Tenancy
The shift from ownership to renting has been driven primarily by economic pressure. The average South African household faces increasing financial strain, with the cost of living rising faster than wages.
High interest rates, fuel price fluctuations, and tighter mortgage requirements have made property purchases unaffordable for many middle-income families.
Consequently, renting has become the preferred or only option. This increase in demand has allowed landlords to maintain low vacancy rates, particularly in high-demand areas such as Cape Town, Johannesburg, and Pretoria.
However, it also places pressure on the quality of applicants, forcing many landlords to weigh occupancy against risk.
Polarised Tenant Profiles and Credit Risk
While the number of tenants has increased, so too has the disparity in their financial stability. Recent reports from rental analytics platforms show a growing divide between low-risk and high-risk tenant categories.
Tenants earning above R80,000 per month are more likely to be classified as minimum risk, with steady income and good credit behaviour.
In contrast, those earning less than R20,000 per month, particularly in the 20–29 age group, tend to fall into high-risk categories. These tenants often struggle with outstanding debts, erratic income, or poor rental history.
For landlords, this creates a dilemma: accept a high-risk tenant to fill a vacancy or wait for a lower-risk applicant who may not materialise soon.
Regional Differences in Arrears and Stability
Not all provinces are affected equally. In the Western Cape, the rental market remains relatively stable. Tenants there are more likely to pay rent on time, and the proportion of residents in arrears is notably lower than in other regions.
The Free State and Mpumalanga, however, have emerged as hotspots for tenant defaults, with some of the highest arrear-to-rent ratios recorded in 2025.
These regional disparities often correlate with local economic conditions, job availability, and access to municipal services. For example, in areas where municipalities face financial or administrative difficulties, property owners may experience more tenant disputes and rent collection problems.
Financial Strain Drives Defaults and Arrears
Economic pressure on households is one of the leading causes of rental arrears. National data shows tenants are now using close to 44 per cent of their monthly income to service debt.
At the same time, rent consumes an additional 28 per cent of revenue. This leaves little room for unexpected expenses or emergencies.
If one income stream dries up, tenants are likely to fall behind on rent sometimes by months. In Q1 2025, around 18 per cent of tenants were behind on payments, and their average arrears amounted to over 75 per cent of a month’s rent.
This represents not only a cash flow problem for landlords but a structural issue within the housing economy.
Screening: A Vital Tool for Landlords
Tenant screening is now more critical than ever. Yet many landlords, particularly private individuals renting out a single property, still rely on informal checks or outdated references.
Only around 60 per cent of landlords perform proper tenant screening before signing a lease.
Modern tenant assessment platforms offer tools that allow landlords to evaluate applicants based on verified data such as credit scores, employment history, and past payment behaviour.
These tools can identify red flags early, giving landlords a more accurate risk profile. In a market where demand is high but stability is uneven, this level of insight is essential.
Rental Market Outlook: Balancing Opportunity and Risk
The outlook for South Africa’s rental market remains positive in terms of demand. More South Africans rent, but arrears and tenant risk rise as macroeconomic volatility continues.
The risk is no longer just about whether a tenant will move in; it’s about whether they can reliably pay rent throughout the lease.
As government policy evolves to address housing affordability, landlords must keep pace with changing legal frameworks, tax structures, and tenant protections.
Regulatory changes could impact eviction timelines, rental caps, or credit reporting, all of which could affect profitability and risk exposure.
Solutions for Property Owners in a Volatile Environment
Landlords should adopt a risk-managed approach. This includes using rental insurance, requiring deposits, enforcing clear lease terms, and using tenant scorecards.
For multi-property owners, portfolio diversification across different regions or property types can help reduce risk concentration.
It’s also important to stay updated with legal developments in rental law, especially regarding dispute resolution processes, landlord responsibilities, and tenant protections. Investing in legal compliance is not just a defensive strategy; it’s a proactive measure to avoid unnecessary costs.
Summary: Stability Requires Strategy
As the profile of the average South African renter changes, so must the practices of landlords. The days of accepting the first applicant are gone. Careful tenant vetting, financial planning, and compliance with local legislation are now central to long-term success.
More South Africans rent, but arrears and tenant risk rise, presenting both opportunity and danger. For those landlords willing to adapt to the evolving environment, the rental market remains one of the most resilient sectors in South African real estate.
FAQs
Why are so many South Africans renting instead of buying?
High property prices, elevated interest rates, and tighter mortgage requirements have made it difficult for many South Africans to purchase homes. Renting offers a more flexible and accessible housing option.
Which tenants are most likely to default on rent?
Tenants in lower-income brackets and younger age groups tend to be at higher risk of default. Those earning less than R20,000 per month are more likely to have poor credit history and inconsistent income.
How can landlords reduce their exposure to arrears?
Landlords should conduct comprehensive tenant screening, use formal lease agreements, request deposits, and consider rental insurance. Regular communication with tenants and early intervention also help prevent arrears from escalating.
What are the warning signs of tenant default?
Repeated late payments, sudden job loss, or disputes over lease terms may signal that a tenant is struggling. Monitoring rent payments and engaging tenants early can help mitigate losses.
Is it safer to rent out in some provinces than others?
Yes. Provinces like the Western Cape tend to have more stable tenants and lower arrears, while others like the Free State and Mpumalanga face higher default rates. Regional economic health plays a significant role in rental risk.
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Our Top Read Blogs:
How to Sell a House in South Africa Fast
Complete Process of Tenant Eviction in South Africa
What Can I Do If A Tenant Is Neglecting My Property
Useful External Links
South African Reserve Bank – Interest Rate Policies
https://www.resbank.co.za/en/home/what-we-do/monetary-policy
Statistics South Africa – Rental Income, Inflation, Economic Indicators
National Credit Regulator – Consumer Credit Profiles and Debt Management
Disclaimer:
This post is for general use only and is not intended to offer legal, tax, or investment advice; it may be out of date, incorrect, or maybe a guest post. You are required to seek legal advice from a solicitor before acting on anything written hereinabove.
