Western Cape outperforms other provinces with a decrease in 'residential vacancy rates'

Africa Melane speaks to Waldo Marcus, Industry Principal at MRI Software and Head of Marketing at TPN.

Residential vacancy rates have risen from 4.42% in Q1 2024 to 6.72% in Q2 2024, according to TPN’s Residential Vacancy Survey Report.

This report showed that KwaZulu-Natal and the Eastern Cape were the worst hit with double digit increases while Gauteng and the Western Cape reported fewer vacancies, in line with the national average.

Marcus says the higher vacancy rate reflects fluctuating supply and demand, economic pressures and evolving consumer behaviour.

"Rental vacancies have been gradually increasing since 2018, driven by a growing supply of rental properties which continued to grow until 2020," Marcus adds.

"Although persistently high interest rates have bolstered the rental market, rental market supply has started to decline as a result of decreasing consumer and business confidence."

There is an uptick in vacancies for Q2 2024, Q1 2024 reflects the lowest average annual national vacancy rate since 2016. The average annual vacancy rate for Q1 2024 was 5.57%.

The rise in vacancy rates between the Q1 2024 and Q2 2024 is not strange as it shows properties under shorter-term leases occupied during the end of the festive season, and the take-up in student accommodation in the Q1 2024 to temporarily boost occupancy rates in the lower rental value bands.

According to Marcus, it is interesting that demand for rental properties is strong despite the higher vacancy rate in the second quarter.

When it comes to interest rates, the first interest rate cut in September, combined with improved consumer confidence, could result in increased purchasing activity, says Marcus.

"This shift could have a dual effect: an increase in rental property supply due to more investments in the market, and a potential decline in rental demand as more consumers shift from renting to buying."

"Both scenarios will influence residential vacancy rates in the long term. In the short to medium term, well-managed rental properties are expected to remain occupied and in demand."

Overall, when it comes to vacant rental properties in the Western Cape, the province is the 'best performer' with the lowest vacancy sitting at 2.33% less this year compared to last year's rate of 3.62%.

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