South Africa’s residential rental market recorded its strongest quarterly growth in more than a year in Q2 2026. However, the latest PayProp Rental Index reveals significant differences in performance across the country’s provincial rental markets, and rising inflation meant that real-terms returns were the weakest in almost two years.

Agencies will need to be vigilant about arrears to protect landlords’ shrinking margins.

Strong rental growth
Rental growth reached 5.2% year on year during the quarter, accelerating for a second consecutive quarter and taking the average national rent to a new high of R9 715, up R497 from a year ago.

Monthly rental growth also strengthened as the quarter progressed, rising from 4.7% in April to 5.3% in May and 5.6% in June – the fastest monthly growth recorded since February 2025.

“It’s encouraging to see rental growth accelerate for a second consecutive quarter, but Q2 also shows just how differently provincial rental markets are performing,” says Michelle Dickens, Commercial Director at PayProp.

Western Cape pulls ahead
The Western Cape set the pace in Q2, recording phenomenal rental growth of 9.7%, its highest since Q4 2024. 

Average rent in the province reached R12 561, R1 107 more than a year ago and R436 higher than in Q1. Western Cape tenants now pay R1 999 more on average than tenants in the country’s second most expensive rental market, the Northern Cape. 

The strength of the Western Cape market had a distorting impact on the national result. While national growth accelerated, seven of South Africa’s nine provinces recorded rental growth below the national average during Q2. PayProp calculates that if the Western Cape is removed, national rental growth falls to 4.3%, below CPI inflation. 

Despite the rapid increase in rents, tenant payment performance in the Western Cape has remained strong. Just 12.3% of tenants in the province were in arrears in Q2, the lowest percentage ever recorded for any province in the PayProp Rental Index. 

However, affordability should be no less of a focus in the province than in others. More than a quarter (27.5%) of Western Cape rental properties now cost more than R15 000 to rent, restricting a tenant with a budget of R7 500 to less than a quarter of the available rental stock in the province.

Provincial fortunes shift again
Elsewhere, the North West was the only other province to outperform national rental growth, accelerating from 6.5% in Q1 to 7.8% in Q2. Average rent reached R7 679 in the latest quarter, up R554 year on year.

Gauteng and KwaZulu-Natal remained closely matched with rental growth of 4.4% and 4.2% respectively. Their average rents were even closer, at R9 646 in Gauteng and R9 657 in KwaZulu-Natal – a difference of just R11. 

Some of Q1’s strongest performers lost momentum. Northern Cape rental growth slowed sharply from 12.9% in Q1 to 4.3% in Q2, while Limpopo recorded growth of 4.1%, its lowest rate since Q4 2021.
At the bottom end of the table, Mpumalanga remained South Africa’s slowest-growing rental market with annual rent inflation of just 2.3% in Q2, although this was an improvement from 0.4% in Q1. Free State rental growth also recovered to 3.3%. 

“Provincial performance can shift significantly from one quarter to the next,” says Dickens. “For landlords and rental professionals, up-to-date local market data is essential when setting rents and assessing the performance of a rental property.”
Inflation closes the gap
While rental growth accelerated in Q2, inflation also increased throughout the quarter, reaching 5.0% in June. 

Rental growth therefore remained ahead of inflation, but only narrowly. In real terms, growth is now at its weakest since Q3 2024, despite the improvement in nominal rental growth. 

For landlords, the narrowing gap is important as it means the cost of owning and maintaining a rental property may also be going up. “Stronger rental growth is positive, but it needs to be viewed in the context of the wider cost environment,” says Dickens. “The margin over inflation has narrowed, and that will be important to watch over the remainder of the year.”

Arrears edge up from record low
Tenant payment performance remains strong nationally, although there was a small increase in the proportion of tenants in arrears. 

In Q2, 16.9% of tenants were behind on their rent, up from the record low of 16.7% recorded in Q1. Despite the increase, this remains the joint-second lowest arrears level ever recorded in the PayProp Rental Index, but agents should be on the lookout for further rises in Q3 and Q4.

Among tenants who were in arrears, the average amount owed improved slightly, from 74.3% of one month’s rent in Q1 to 73.5% in Q2. 

Signs suggest payment pressure could increase. PayProp notes that the May interest rate hike will push up tenants’ debt repayments, which account for around half of the average tenant’s income. Arrears typically lag interest rate changes by around six to nine months, meaning the impact could become visible around the new year. 

For PayProp, Q2’s stronger rental growth is a positive result, but uneven provincial performance, rising inflation, and potential pressure on tenant finances mean the second half of the year will require close attention. 

“Arrears remain close to record lows, which is encouraging,” says Dickens. “But the Q2 results show why landlords and rental professionals need to look beyond national averages. Rental growth, tenant affordability and payment performance can differ significantly from one market to another, and those local conditions are ultimately what determine achievable rents.”