MAIN IMAGE: Michelle Dickens – commercial director of PayProp, Paul Stevens – CEO of Just Property
Senior writer
PayProp’s latest Rental Index shows national rental growth accelerated to 5.2% in the second quarter, yet some landlords are lowering their asking rents. Michelle Dickens, commercial director of PayProp and Paul Stevens, CEO of Just Property, explained why rental averages do not tell the whole story, and what determines the rent a property can realistically achieve.
Dickens said rising rental growth and falling asking rents can occur at the same time. “National and provincial rental growth figures measure the broader market and remain important indicators of rental market health and overall investment sentiment.”
That raises the question of whether national and provincial averages are becoming less useful when assessing what an individual property can achieve. Dickens said averages remain valuable indicators of market direction, investor confidence and broader housing trends. “They also provide useful data points for lenders, investors, and industry participants assessing market performance over time.
“However, these averages should be viewed as macro indicators rather than pricing tools for individual properties. Rental outcomes are becoming increasingly localised, with performance varying significantly between suburbs, streets, and even individual properties within the same neighbourhood.”
She said property practitioners and owners should use average rental trends as a starting point, while “recognising that actual rental value is determined by factors specific to the property and its target tenant market”.
Stevens agreed, saying the rental market is ultimately driven by what tenants are prepared and able to pay. “The sooner landlords respond to clear market feedback, the sooner they can reduce the risk of prolonged vacancy.”
Managing owners’ expectations
Rental agents often have to manage owners’ expectations, particularly when landlords have spent money on renovations or improvements and expect a higher rental in return.
“This is a fairly common conversation,” Stevens said. “However, tenants assess a property differently. They compare it with other available options, consider their monthly affordability, and weigh up the benefits of each property. An owner may believe a property warrants a premium, but that premium needs to be supported by something the tenant genuinely values.
“Our role as rental professionals is to provide landlords with an objective view of comparable properties, current competition, and actual tenant response. We need to help owners distinguish between the rental they would like to achieve and the rental the market is likely to support.”
What determines rental value?
Both Dickens and Stevens said assessing a property’s rental potential means looking beyond the number of bedrooms or its size.
“Several factors contribute to rental performance differences at a hyper-local level. These include proximity to employment hubs, transport infrastructure, schools, lifestyle amenities, and security considerations,” said Dickens, adding that property-specific factors are equally important.
“Each property may appeal to a different segment of the market. Student accommodation, co-living arrangements, family homes, holiday-oriented rentals, and professional shared accommodation all respond to different demand drivers and affordability considerations. Understanding the property’s optimal rental model is becoming increasingly important when determining achievable rental value.”
Stevens said rental pricing needs to reflect the individual property and the competition around it. “Broad suburb averages are useful, but understanding who the likely tenant is and what that tenant values is essential to achieving the best possible rental.”
He added that supply and affordability can also create differences between neighbouring areas. “One suburb may have numerous similar properties competing for tenants, while another has limited stock and stronger demand from a particular tenant group.”
What will tenants pay more for?
According to Stevens, tenants are generally willing to pay more for features that make their lives easier. “Depending on the market and target tenant, these can include secure parking, reliable security, modern kitchens and bathrooms, energy efficiency, backup power, good connectivity, outdoor space, and properties that are well maintained and ready to occupy.”
He cautioned, however, against assuming that improvements will automatically translate into a higher rental.
“Landlords can sometimes overestimate the value of the money they have spent on a property. The important distinction is between improvements that make a property more competitive and improvements that tenants are actually willing to pay extra for,” he said.
The cost of getting the price wrong
Stevens said the gap between an advertised rental and the amount ultimately achieved should be weighed against the cost of vacancy.
“If a landlord is asking R15,000 per month but could secure a suitable tenant at R14,000, accepting the lower rental would generate R168,000 over 12 months, assuming continuous occupation. Holding out for the additional R1,000 per month means sacrificing R14,000 for every month the property remains vacant.”
On those figures, a single month of vacancy would take 14 months of the extra R1,000 to recover. Two months would take 28 months, before any other vacancy-related costs are counted.
Dickens made a similar point, saying landlords should focus on income across the year rather than the advertised monthly figure.
“Successful landlords focus on maximising annual rental income rather than simply pursuing the highest possible advertised rental figure. A well-priced property with minimal vacancy will typically outperform an overpriced property that remains unoccupied for prolonged periods.”
Setting rentals in today’s market
Dickens said setting a rental requires an assessment of current market conditions that goes beyond average area rentals, taking into account factors such as the property’s condition and its local demand profile.
“The most sustainable rental strategy balances market-related growth with affordability and tenant stability. Professional property management, transparent communication, effective maintenance processes, and accurate rental collection systems all contribute to the long-term performance of an investment property and support stronger landlord outcomes over time.”
Stevens said the most successful landlords treat their properties as investments and base their decisions on evidence. “Pricing competitively, responding to market feedback, and prioritising consistent occupancy are all part of protecting the return on that investment.
“My message to landlords is simple: price for the market you are in today, not the market you remember or the rental you would ideally like to achieve.”
