Two Cape Town apartments recently went viral for their overpriced monthly rent. A modest apartment in Green Point was going for R22,000 while another small unit in Durbanville was advertised at R16,000, despite needing repairs and having an ‘ugly kitchen’ with broken appliances. Social media users criticised the price-quality mismatch, noting that similar or better homes in Joburg cost far less.  

Affordability concerns like these are a key reason why tenants are relocating from the Western Cape, according to nearly 80% of rental agents in PayProp’s 2025 State of the Rental Industry report. “Even more concerning, the vast majority of South African households (80%) are priced out of the formal housing market because their monthly income is under R26,000,” says Renier Kriek, MD of innovative home finance business Sentinel Homes. “We have an undersupply of about three million formal housing units.”

Living in Cape Town is particularly pricey, with average property sale prices increasing from R1.6 million in 2020 to R2.1 million in 2025. In contrast, Johannesburg’s prices have remained relatively flat over this period, staying on average between R1 million and R1.5 million, according to property analytics firm Lightstone.

Soaring rent 
“Obviously the higher capital values mean that people who buy for investment require a higher nominal return, which means the rents go up,” says Kriek. This has been happening in the Western Cape, where the PayProp Rental Index shows 9.6% year-on-year rental growth and average monthly rents reaching R11,285 in Q1/2025 – significantly higher than Gauteng (R9201), KwaZulu-Natal (R9170) and the Eastern Cape (R7330). 

Rent control 
Calls for rent control in Cape Town are getting louder. The idea is to cap rent increases to make housing more affordable. However, this may win populist votes and provide short-term relief for tenants, but won’t fix the housing shortfall, says Kriek, pointing to unsuccessful rent control in cities like New York, Berlin, Stockholm or Tokyo. While rent control impacts the entire property market, it ironically hits hardest in the low-income band – those who should benefit the most. 

“Rent control leads to underinvestment and poorly maintained units as landlords have limited incentives to maintain or expand their rental stocks because their profits are capped,” says Kriek. Another problem is misallocation, where some tenants will stay in rent-controlled units even when these no longer match their needs. By blocking the units for people who genuinely need them, they create an inefficient housing distribution that worsens the undersupply further. 

“Rent control is the most efficient technique currently known to destroy a city - short of bombing.”

Making small units profitable
There’s ample private sector money available to invest in rental housing, says Kriek but government needs to change the market design that makes this segment unprofitable. Small units are more expensive per square metre to build – and sell – than larger ones. 

In addition, he says, tenants in affordable units (sub-R7000 rent/month) are more frequently in rent arrears than higher-income tenants as they feel economic pressure harder. The number of ‘squatting’ tenants (who haven’t paid rent for three consecutive months and are still occupying the property in the fourth month) is also increasing: the TPN Squat Index rose from 3.48% in Q4/2023 to 3.71% in Q2/2024.

Legal protection of landlords
The balance of power is unduly tipped against landlords and needs to be levelled, says Kriek. “The law that governs evictions, the Prevention of Illegal Eviction and Unlawful Occupation of Land Act (PAI), isn’t fit for purpose. 

It was designed to evict land squatters but due to poor drafting it also applies to the eviction of tenants who don’t pay their rent or refuse to move out when legally required.” This makes the process unnecessarily expensive, time-consuming and open to exploitation. 

“Historically, eviction is sensitive topic in SA,” concludes Kriek. “But if we don’t allow strict enforcement of payment obligations, then landlords won’t invest in rental housing, which is the easiest and the quickest way, using the least amount of government resources, to fix our housing undersupply.” 

ENDS

In its June 2025 Property Newsletter, automotive and property data provider Lightstone reports that only one formal house exists per 3.3 families who earn less than R26,000 per month. This accounts for more than 80% of South African households. The overwhelming majority of South African households are currently priced out of the South African property market, and this trend is worsening.

“There’s something very wrong if such a large demand is not being met and, although the problem is well known in the property industry, no real solutions are forthcoming from the government actors who are responsible for solving these problems,” says Renier Kriek, Managing Director of innovative home finance provider, Sentinel Homes.

He says the root causes are mainly systemic and need to be addressed by the government. It is simply not acceptable that since 2000 we have added 19.3 million inhabitants in SA but our economy has managed to produce only 1.9 million homes.

Where we are
Not only are there not enough houses but new developments are victim to rising construction costs, making each generation of property less affordable to consumers than previously. In fact, property prices have been outpacing wage increases for the past 70 years, not only in SA but in most of the world.

Add to this trend South Africa’s flaccid economic growth resulting in low job creation and low wage growth, and it’s easy to see why affording a home is becoming harder and harder for low to middle earners.

National changes
Certain things need to change outside the property market before problems can be tackled from within, says Kriek.

• Economic growth: South Africa sorely needs economic growth driven by consistent economic policy. Not only graft but also mismanagement of state and parastatal finances need to stop. “For example, paying CEOs of dysfunctional utilities more than the Prime Minister of the UK is wasteful and robs citizens of funds that could go towards housing,” says Kriek.

 

• Structural reform: Foreign investment coming into South Africa is not the kind that creates infrastructure or jobs. It’s portfolio money that can easily be withdrawn. The country needs structural reform that embraces deregulation, labour market reforms, trade liberalisation, privatisation or public-private partnerships, and tax reforms to encourage infrastructure investment. This may also require currency devaluation, which is a difficult political proposition and is unlikely to be popular with richer consumers.

 

• Vocational training: Artisans are retiring faster than they can be replaced, which puts upward pressure on housing production costs. Most of South Africa’s workforce is not well-suited to its services-oriented economy. It needs to reindustrialise to create jobs for the skills we have, encouraging technical trades, such as plumber or electrician.

 

• Restrictive labour policies: South Africa’s restrictive labour policies make labour much more expensive than in competing economies, such as Bangladesh or Sri-Lankha. This could be resolved by devaluing the currency or reducing imports, or simply by liberalising labour laws. That might mean workers are paid less but that more people will have jobs as a way of creating an economy that works for all – and this would be a temporary situation that will correct itself as more jobs are created.

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“Making such changes at a national level will ensure that problems in the property market are not intractable,” says Kriek. “But these necessary reforms will also go a long way toward rejigging the economy generally for the better.”

Property market changes
Inside the property market, several problems are making housing construction more costly and therefore less affordable when properties are sold.

• Bureaucratic sprawl: This is one of the largest problems developers face and not unique to South Africa. Bureaucrats and lawmakers heap regulation upon regulation, increasing time to approvals from month to years - or decades in some cases. The government needs to streamline or completely remove regulations that cause delays and add costs to housing developments.

 

• NIMBYism: NIMBY (Not In My Back Yard) refers to people who object to new developments they perceive to be invasive of their lifestyles or threatening to their status. In South Africa, it has become the nimby pastime to delay new housing developments them in the courts. This not only discourages development but the spectre of a nimbyist court challenge adds to the cost of producing new housing stock. Legislative and enforcement frameworks intent on solving for housing  production should be designed to allow for rigorous public consultation and objections but limit the time allowed for the process and restrict access to the already full and overburdened court system.

 

• Fixed charges: Fixed charges, like a basic electricity fee, hit poorer households the hardest. Low-cost housing becomes substantially more expensive when municipal rates and fixed charges are added, creating the risk that owners cannot afford the property. This disincentivises developers from entering that segment of the market. So, as a rule, fixed charges should never be applied and all municipal charges on property should be either a progressive tax (i.e. you pay a smaller percentage if you are poorer) or based on actual consumption.

 

• Small unit avoidance: Fitting more smaller units on a piece of land means building more kitchens and bathrooms, which are the most expensive structures in a house, regardless of size. It also takes the same energy to sell small properties as large properties. So, there are already structural disincentives to building small properties. “The government can offset this deterrent with better tax breaks, or programmes that release land to developers to build only small, affordable homes,” says Kriek.

 

• Slow land release: A major part of the solution is the faster release of new land for development. Socially responsible public comment and input must be part of a well-structured and well-managed but shortened process. Some processes, like an environmental impact study, could be run concurrently with others or even be eliminated completely for some areas. Ideally, processes would be designed to be carried out in advance on land earmarked for development and developers would be told which land is available without having to wait. For example, municipalities may conduct environmental impact assessments in advance on peripheral areas earmarked for development

 

• Lender and landlord protection: Home financers or landlords are often seen as large bureaucratic and potentially predatory institutions that do not invite sympathy from the public (or the courts). Yet, they provide an invaluable service by transforming the shorter-term savings of ordinary South Africans into capital that goes to homeloans and housing developments, among other longer-term investments. Eviction procedures and foreclosures need to be rationalised, and their timeframes shortened to ensure that, while consumers must be treated fairly, this important function is not put at risk through delays and procedural disadvantages. Burdensome termination procedures disincentivise capital deployment into the provision of housing finance or rental housing.

 
Opening the door to housing that’s affordable
If 80% of South Africans cannot afford a home, and developers are unwilling to meet the demand, something is terribly wrong. It’s not an innovation or economical problem but a systemic one that the government needs to rectify. The problem is market design, and that is something for which we rely on government, and for which the political will must exist to take some tough decisions.

“The private sector is profit driven and the demand clearly exists, so it’s up to the government to create the incentives and ease the restrictions that prevents the private sector from earning their bread in the provision of affordable housing,” says Kriek. “There’s more than enough money floating around – government just needs to create a market that provides incentives for the available resources to flow to where the demand already exists.”