The TPN Residential Rental Monitor for Q2 and Q3 2025 shows a strong rental market with prices rising faster than inflation. However, there are signs of financial strain among households, as payment momentum slows across key segments.

While most tenants are still paying on time, the rate of improvement is slowing. Waldo Marcus, Director of Corporate Marketing at TPN, notes a turning point: “Stable-but-slowing good standing reflects the strain in household budgets. We’re seeing resilience, but also clear warning signs in tenant behaviour.” Partial payments have declined slightly from 10.06% to 9.9%, though enhanced tenant screening following South Africa’s removal from the FATF grey list has helped derisk new placements.

Tenant Payment Trends

Tenants in good standing increased slightly from 83.94% in Q2 to 83.95% in Q3, marking the slowest improvement in recent cycles. On-time payments rose marginally from 69.8% to 69.91%, while tenants making no payments increased from 6.0% to 6.15%. Marcus highlights that improved screening protocols have strengthened collections, but rising household pressure is evident in the data.

Marcus adds, “Improved protocols have derisked new placements and strengthened collections, but rising household pressure is now visible in the data.”

Rental Escalations Outpace Inflation

National rental escalation increased from 4.62% in Q2 to 4.76% in Q3, outpacing the CPI for September 2025 of 3.4%. Low-value rentals (R1,500) saw the sharpest escalations, driven by rebasing and rising multi-let demand. Mid-market rentals (R4,500 – R12,000) remained stable, while upper-market rentals (R25,000+) showed renewed momentum, rising from 4.47% to 5.05%.

Marcus cautions: “Upward pressure on rentals limits affordability for the most vulnerable tenants.”

Evolving Tenant Risk Profile

TPN’s 12-month tracked tenant risk data shows positive migration for reliable payers, with average-risk tenants decreasing from 18.3% at application to 5.6% during occupation. However, high-risk profiles increased from 11.7% at application to 13.6% during occupancy. Consumer credit strain is a contributing factor, with credit-active South Africans dedicating 28% of their income to debt servicing. Credit card balances and personal loan values continue climbing, increasing the risk of rental default later in the lease term.

Marcus warns: “Growing reliance on credit increases the risk of rental default later in the lease term.”

Provincial Performance Varies

The Western Cape remains the strongest performer nationally, despite some softening. Non-payment increased from 5.28% to 5.51%, and escalations rose slightly from 4.88% to 4.9%. Gross yields for full-title properties are at 8%, while sectional titles are at 10%. Gauteng showed steady recovery, with good standing increasing from 83.23% to 83.29% and escalations rising from 3.87% to 4.08%. Rental levels in Gauteng are R8,307 for sectional titles and R9,995 for full titles, with gross yields at 12% to 12.2% and 7.1% respectively.

Marcus notes: “Higher property values are compressing yields and slowing escalations.”

The Rising Cost of Default

Defaults are becoming more expensive, with the average civil judgment for rental debt increasing by 182.67% over the past decade, from R13,946 in 2015 to R39,421 in Q3 2025. Total rental-related judgments over the decade reached R2.75 billion, with 126,902 judgments granted out of 216,560 summonses issued.

Marcus emphasizes: “Swift legal action and compliant leases are non-negotiable.”

As the rental market handles these challenges, landlords must balance growth with risk management. Heading into 2026, the market is split into a stable core of tenants supporting rental growth and a growing high-risk segment strained by debt, rising costs, and escalating rentals. Landlords must implement real-time monthly tenant monitoring, strengthen collections, apply measured rental escalations, and increase tenant engagement ahead of high-risk periods.

Marcus shows: “Relying solely on application credit scores is operating blind. Real-time data is essential to manage risk and protect returns.”