The residential rental market continued to cool in Q3 2025 according to the latest PayProp Rental Index with year-on-year rental growth having eased to 4.9%, slightly down from 5% in Q2 2025.

Average rent rose to R9 286, an increase of R430 compared to the same period in 2024 but the gap between rental growth and inflation narrowed as CPI edged higher during the quarter.

At the same time, the proportion of tenants in arrears rose to 17.2% – the highest level in a year (but still close to the historic low of 16.9%). However, tenants who did fall behind on their rent owed less than ever before with the average arrears’ percentage having dropped to a new record low of 72.6% of monthly rent.

“After several quarters of strong real-terms rental growth, we are starting to see affordability pressure build,” says Michelle Dickens from PayProp. “While most tenants are still managing their commitments well, the rise in the number of tenants in arrears is a reminder that sustained increases in rent, debt levels and living costs can quickly squeeze budgets. As always, consistent tenant vetting and proactive renewal management, including rent increases, remains essential.”

Inflation averaged 3.4% across the quarter, up from Q2 2025’s 2.9%, softening real-terms rental returns. Despite this, Q3 2025 marked the fifth consecutive quarter in which rental growth outpaced inflation, albeit by a smaller margin than earlier in the year. Dickens notes that rental growth may now be stabilising after a period of higher increases to make up for negative real-terms growth during and immediately after the pandemic.

Rental performance varied significantly across SA in Q3 2025, with some provinces accelerating while others lost momentum. The Western Cape still has the highest rents in the country, posting 7.0% growth, which took average rent to R11 635. Despite sustained rental price growth, the province also maintained the lowest arrears levels nationally, highlighting the resilience of tenants in the area.

Limpopo’s rental growth surge continued for a fourth consecutive quarter, with rents climbing 10.9% year-on-year to reach R9 283. The province is on track to overtake KwaZulu-Natal and possibly Gauteng in average rent, if current trends persist.

Gauteng saw a slight improvement after two subdued quarters, recording 3% growth and lifting the average rent to R9 321. KwaZulu-Natal grew at 3.1%, taking its provincial average to R9 293 and remaining within a narrow margin of Gauteng and Limpopo in the price rankings.

The Eastern Cape continued to build on its recovery with strong 7% growth, bringing the average rent to R7 608, while the Free State slowed to 5.1% with rents averaging R7 120, now the lowest in the country.

At the lower end of the growth spectrum, Mpumalanga slipped into negative territory at -0.2%, becoming the first province to record a year-on-year decline since Q1 2024. Average rent edged down to R8 441. Meanwhile, the Northern Cape maintained its momentum with 7.1% growth and average rent of R10 111.

As rents rise, upfront costs for tenants are also increasing. The average damage deposit in SA has remained stable at 1.31 times the average rent, but provinces with higher rents have correspondingly higher deposits. In the Western Cape, the average deposit reached R19 630 in Q3, putting further strain on household budgets.

“While the sector remains fundamentally sound, we are entering a more delicate phase for tenant affordability,” says Dickens. “Agents who strategically understand their local market data and who use it to guide pricing, vetting of tenants and renewals, will be best positioned to protect both landlords and tenants in the months ahead.”