The South African multifamily residential rental sector is emerging as a formidable asset class for institutional real estate investors.
This is according to a report about the sector, compiled by the Centre for Affordable Housing Finance (CAHF) for the South African Multifamily Residential Rental Association (SAMRRA).
“Our research confirms that the multifamily residential rental sector in South Africa is characterised by its resilience, stability and potential for long-term growth and sustainable value creation,” says SAMRRA CEO Myles Kritzinger.
The CAHF report reveals that with approximately 4,5-million (23%) South African households renting their homes, demand for multifamily housing is robust. Notably, some 15% of these households, or around 685 000, reside in ’apartments’, underscoring the sector’s footprint and highlighting a greater opportunity for delivery of institutional grade rental portfolios.
Over the past five years, the rental market has seen a 9% increase in households renting apartments, adding around 54 000 new rental units to the market. This growing (and unmet) demand is fuelled by demographic shifts and urbanisation trends, positioning multifamily rentals as a cornerstone of modern housing solutions.
The profile of the tenant is increasingly those who choose to rent and actively seek a balanced lifestyle offering through amenity-rich, well-located residential rental offerings.
“The growth trajectory is not only indicative of the sector’s vitality but also highlights the strategic advantage for investors looking to capitalise on a burgeoning South African rental market. But investment in South Africa’s multifamily rental sector is about more than capitalising on growth, it’s also about aligning capital allocation with broader sustainability goals,” notes Kritzinger.
The country’s potential-packed pipeline of multifamily projects scores high on environmental, social, and governance (ESG) metrics, providing investors with confidence that their investments contribute positively and responsibly to sustainable development, an increasingly important focus for the investment community.
Kecia Rust, executive director and founder of CAHF, points out that South Africa’s multifamily residential rental sector is an increasingly robust, demonstrably resilient and qualitatively rewarding sector bringing positive, stable returns to investors and a promising pipeline of developments that surpass ESG expectations while delivering high-quality accommodation to an underserved market.
“Interestingly, the offering has shifted in recent years from simple for-rent accommodation to a full lifestyle concept, known as ‘convenience living,’ with access to a suite of additional amenities,” highlights Rust. “The market has responded such that vacancies and arrears are manageable.”
Rust adds that, at a local level, these developments are contributing to urban regeneration and positive fiscal benefit to their local authorities, supporting good urban management and changing the face of South African cities.
Even with its promise, the multifamily residential rental market in South Africa has remained below the radar of many institutional investors, primarily stemming from limited data availability. However, SAMRRA is actively working to overcome this barrier by providing a credible industry platform which advocates for the asset class as well as and releasing detailed data and insights necessary for informed investment decisions. This initiative is boosting investor confidence and facilitating more robust market analyses.
Increasing transparency into the sector’s performance metrics highlights its investment appeal. According to MSCI, the multifamily residential rental sector not only outperforms other real estate classes, such as office properties, and was the only sector to record an improved NOI yield in 2022. It also offers stable, less-risky total returns underpinned with cash-backed income yields — a strategic advantage that is further supported by favourable underlying property fundamentals. These attributes make it an attractive proposition for investors seeking long-term, stable income streams in a volatile market environment.
Globally, multifamily rentals are recognised as a mature asset class, accounting for a significant portion of investment property by value. In South Africa, the sector is poised to follow this trajectory, driven by high occupancy rates, urbanisation and changing lifestyle preferences fuelled by increasing rental demand, the multifamily sector offers a compelling case for long-term institutional investment.
A recent cross section of SAMRRA members performance data highlights recent member occupancies ranging between 96,5% to 98,5%, with strong collections in December 2024 of 98% and over. In many instances, SAMRRA members have also achieved record leasing months, consistently concluding around 500 leases per month, reaffirming the strong demand for quality rental accommodation.
The multifamily rental sector’s strategic importance is underscored by its contribution to the South African economy, supporting job creation and economic growth. As the sector evolves, it continues to attract new players and technological advancements, further enhancing its appeal to investors.
“The future of multifamily rentals in South Africa is bright, with significant opportunities for scale and institutional investment into an asset class that is clearly working. As the sector continues to mature, it is set to become a mainstay of institutional investment portfolios, offering a foundational blueprint for the future of real estate in South Africa,” says Kritzinger.