In today’s rental market, property managers and landlords have no choice but to adopt a sophisticated, data-driven approach.
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The latest TPN Residential Rental Monitors for the second and third quarters of 2025 reveal a landscape shaped by robust rental growth and tenant resilience, even amid persistent economic hardship.
At the same time, the data highlights accelerating tenant-risk migration and a slowdown in payment-performance momentum. This complex interplay of forces underscores the need for landlords and property managers to leverage insights, mitigate exposure, and capitalise on opportunities for stable, sustainable returns.
While the residential rental market continues to show fundamental strength, the positive momentum observed earlier in the year has slowed, suggesting that cracks are beginning to appear in consumer household budgets.
The proportion of tenants meeting their full rental obligation by the end of the month saw only a marginal increase from 83.94% in the second quarter to 83.95% in the third quarter of 2025.
This minor improvement marks a significant slowdown compared to previous quarters, indicating a growing struggle for many tenants. The rate of tenants paying their rent on time improved from 69.8% in the second quarter to 69.91% in the third quarter. This suggests that while full payment is slowing, tenants who can afford it are prioritising timely settlement.
The percentage of tenants who made no payment towards their rental obligation increased from 6.0% in the second quarter to 6.15% in the third quarter.
TPN cautions that this figure typically rises during the fourth quarter as household budgeting priorities shift towards the festive season, demanding proactive management by property professionals. Partial payments also saw a minor dip from 10.06% to 9.9% in the third quarter.
Waldo Marcus, Director: Corporate Marketing at TPN from MRI Software says this stable-but-slowing good standing comes after the positive strides in compliance leading to South Africa's removal from the Financial Action Task Force (FATF) grey list in the fourth quarter.
“The enhanced screening protocols that contributed to the delisting have already had a tangible, positive impact, derisking new tenant placements and contributing to improved rental collections overall,” he reports.
Rental escalations outpace inflation
Despite the signs of financial stress among tenants, property investors and managers have maintained a bullish approach to rental pricing, pushing average escalations well above the Consumer Price Index (CPI).
National rental escalations increased from 4.62% in the second quarter to 4.76% in the third quarter, consistently exceeding the CPI (3.4% in September 2025).
“This trend of rental prices rising faster than general inflation has been evident since the third quarter of 2024,” says Marcus, adding that the most aggressive escalations are seen in the lowest rental value bands.
“Rentals of less than R1,500 per month increased significantly from 6.33% in the second quarter to 7.86% in the third quarter 2025. This is largely attributed to landlords ‘rebasing’ lower rental values after a period of lower escalations in 2023 and is driven by increased demand for multi-let and room-share properties,” he says.
Gerard Abrahamse 31 Oct 2025 The mid-market bands (R4,500 to R12,000), which account for the majority of the formal rental population (71.5%), saw robust but more stable growth, with the R7,000 to R12,000 band slightly exceeding the national average at 5.02% in the third quarter.
After a slowdown in the first half of the year, the luxury rental market (R25,000+) saw escalations accelerate in the third quarter to 5.05%, up from 4.47% in the second quarter, maintaining above-average growth despite its small market size (1.8%).
“The continued upward pressure on rentals limits the affordability of the most vulnerable tenants,” says Marcus.
The evolving risk profile of the active tenant
TPN’s Residential Rental Monitors track screened tenants for 12 months post-application. The second quarter monitor reveals a frequently overlooked dynamic: the migration of tenant risk over the course of a lease agreement. While the application process screens for initial suitability, TPN’s data reveals that a tenant’s financial health is not static.
The average tenant who consistently meets their rental obligation saw their risk profile improve in the second quarter. The Average Risk profile category reduced significantly from 18.3% at application to 5.6% during occupation, with these tenants migrating to the Low Risk profile (which grew from 58.4% at application to 63.5% during occupation). This proves that dedicated rental payments contribute positively to credit profiles.
Of concern, however, is that the analysis shows a growing number of tenants slipping into higher-risk categories.
Marcus explains that, “Tenants initially classified as High Risk at application (11.7%) are being joined by others who were previously lower risk, causing the monitored High Risk profile to increase during occupation. Similarly, the Very High Risk profile increased from 11.7% at application to 13.6% during occupation.”
This negative migration aligns with broader consumer trends, as tenants increasingly rely on credit to manage expenses. TransUnion reports that both outstanding balances on credit cards and the average new personal-loan amount increased in the second quarter.
The overall instalment to net income ratio for credit-active South Africans is 28%, highlighting the significant portion of income dedicated to debt servicing.
“This increased reliance on credit elevates the risk of defaulting on rental payments later in the lease term,” points out Marcus.
Provincial performance highlights
Tenant-payment performance remains uneven across provinces with third quarter data highlighting shifts in stability and pricing power, correlating with regional economic conditions and property-value dynamics. The Western Cape continues to have the highest percentage of tenants in good standing despite two consecutive quarters of slippage.
There was a small increase in tenants who did not make any payment toward their rental obligation, rising from 5.28% in the second quarter to 5.51% in the third quarter. Rental escalations increased marginally from 4,88% in the second quarter to 4,9% in the third quarter.
“The overall trend in the Western Cape continues to be downward but remains above the national average,” says Marcus. “The gross yield for rental properties in the province is 8% and 10% for full-title and sectional title, respectively. Higher average property values are driving down yields in the province, coupled with a slowdown in rental escalations,” says Marcus.
In Gauteng, tenants in good standing improved slightly from 83,23% in the second quarter to 83,29% in the third quarter. The average rental for sectional-title units for the third quarter is R8,307 per month, while full title is set to breach the R10,000 mark with average rentals for the third quarter at R9,995 per month.
Gauteng’s rental-market escalations grew to 4,08% in the third quarter, up from 3,87% in the second quarter. Gross yields for sectional-title properties improved marginally (12% to 12.2%) while full-title gross yields remained flat at 7,1%.
The rising cost of default
TPN’s data reveals that the financial impact of defaults continues to grow, despite improved collections and fewer cases ending up in court. The value of the average rental civil judgement granted has seen a dramatic 182.67% increase over the past decade. The average rental default value grew from R13,946 in 2015 to R39,421 by the third quarter 2025.
Over the last decade, civil judgments totalling R2.75bn for rental debt have been granted against individuals.
“While improved ‘soft collections’ and enhanced due diligence are resulting in fewer summonses being issued (216,560 summonses issued over the last decade resulted in 126,902 judgement orders), those cases that do reach court are of a significantly higher value,” reveals Marcus, adding that not only do landlords need to ensure legally compliant leases, but also follow up with swift legal action where necessary.
The need for real-time risk management
The TPN Residential Rental Monitors for the second and third quarter reveal a deepening market divide. While a stable core of tenants drives rental growth, this is overshadowed by a growing segment facing accelerating financial distress post-application.
Robust rental growth, often above CPI, is testing the limits of consumer resilience. This is evidenced by the slowdown in good standing improvement and a slight uptick in non-payment as the high-risk fourth quarter approaches, necessitating caution.
Moving forward, landlords must strike a delicate balance: enforce collections and adhere to the new stricter compliance framework, while prioritising proactive tenant engagement to sustain good standing.
The ability to maintain upward rental growth without severe payment deterioration will define the sector's success in the year ahead.
Landlords relying solely on application-phase credit scores are operating blind to the risk migration that occurs during tenancy. The capacity to act on real-time data through monthly tenant monitoring is no longer a luxury but a fundamental necessity for effective risk management.
Leveraging these advanced tools will be crucial to protecting portfolio returns against intense economic pressures in the final quarter of 2025 and into the new year.
