One in four rental applicants in South Africa is being flagged as high-risk, highlighting growing financial pressure on households.
The figure comes from PayProp’s latest tenant assessment data. Just Property CEO Paul Stevens said the statistic said less about tenants than about the state of the average household balance sheet this year. He said applicants were being flagged as high-risk during automated screening.
“This is a highly polarised market. Demand for well-located rentals stays strong as high prices keep people renting for longer. But household reserves are heavily compromised,” Stevens said.
The company said three forces were driving the trend: years of high interest rates, aggressive municipal tariff and utility increases, and mounting unsecured debt. The South African Reserve Bank (Sarb) raised the repo rate by 25 basis points to 7.25% this week adding to the financial strain on consumers.
No buffer for the unexpected
Stevens said many rental applicants appeared financially strong when assessed on gross income alone. However, once screening cross-referenced live credit-bureau data — including credit cards, personal loans and vehicle finance — the broader picture emerged.
He said many of the applicants were revealed to be at the absolute edge of their capacity, with no buffer for unexpected expenses.
The company said digital fraud was another factor. Falsified PDF bank statements and identity theft have made manual vetting more difficult.
“Human eyes can't reliably catch altered pixels. But the picture isn't all bleak. National escalations sit at 4.7%, and 83.95% of tenants remain in good standing. The serious risk is concentrated-around 6.15% in real arrears.”
In the latest FNB Residential Property Barometer, FNB senior economist Siphamandla Mkhwanazi said economic growth weakened materially during the second quarter of the year, with GDP contracting by 0.2% quarter-on-quarter.
He said household income growth remained subdued, business confidence had softened and employment conditions remained mixed. These factors were reflected in softer current activity levels and weaker first-time buyer participation.
“While inflation has eased and real interest rates are less restrictive than in previous years, borrowing costs remain elevated from a historical perspective. As a result, affordability remains the dominant constraint in the housing market.”
What a tenant can get with a R7 500 rental budget
Gerhard Kotze, CEO and franchisor at RealNet Properties SA, said a R7 500 rental budget could provide very different options depending on the province.
He said PayProp’s latest figures showed how differently rental stock was distributed across South Africa.
In Gauteng and KwaZulu-Natal, the largest share of properties fell within the R5 000 to R7 500 rental bracket. A tenant with a R7 500 budget could access more than 40% of available rental stock in those provinces.
In the Western Cape, the largest pricing tier was R15 000 or more per month, accounting for 27.5% of the province’s rental stock. A R7 500 budget provided access to less than a quarter of available properties.
Kotze said the entry point for formal renting in the Western Cape had fundamentally changed. He attributed this to semigration, fewer new housing completions and short-term letting, which had squeezed lower- and middle-income renters out of standard suburban areas.
“That pressure is pushing people toward alternatives. Backyard rentals now make up 19% of the national tenant market, and we are seeing more purpose-built cohabiting spaces popping up to fill the void. High rental growth in premium nodes looks good on paper, but the long-term volume over the next decade lies in delivering well-located affordable rental stock that bridges this gap.”
Meanwhile, registered property practitioner Eugene McArthur warned landlords that gross rent was not the same as their return.
He described it as the figure that looked good on paper before the real costs were considered.
“Most landlords know their monthly rental income. Far fewer sit down and subtract bond repayments, levies, rates and taxes, insurance maintenance, vacancy periods, and letting agent fees-before deciding whether the investment is actually working for them,” McArthur said.
He added that net rental income was what remained after those costs.
“That’s the number worth paying attention to
This doesn't mean residential property is a poor investment. It means the right expectations from the start lead to better decisions-whether you're buying an investment property, reviewing an existing one, or considering whether to sell.”
Grant Smee, CEO of Only Realty Property Group, said few situations were as financially damaging for South African landlords as a tenant who stopped paying rent but remained in the property.
He said that while rental income might stop, a landlord’s financial obligations as a homeowner continued. He added that South Africa’s eviction laws gave landlords limited recourse while the process played out.
“That’s why the proposed amendments to the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (better known as PIE) will be closely watched by landlords across the country.”
given.majola@nationalmg.co.za