Johannesburg - The percentage of residential tenants in good standing declined by 2.8 percent in the first quarter of this year, the third-largest deterioration in this category of tenants on record.
The latest residential rental quarterly rental monitor by TPN credit bureau said the decline in this category of tenants was only worse in the 2008/09 recession but stressed it was “nowhere near as severe as the 11 percent plunge the market experienced then”.
The “in good standing” category includes tenants who paid on time, paid in the grace period and paid late.
TPN said the percentage of tenants in good standing declined to 82.17 percent from 84.97 percent in the fourth quarter of last year.
Tenants in good standing comprised 67.2 percent of tenants who paid on time in the first quarter, 4.73 percent who paid during the grace period and 10.17 percent who paid late.
TPN said 6.04 percent of tenants were in the “did not pay” category and warned that this category was “edging upwards”.
In the fourth quarter of last year 5.38 percent of tenants were in the “did not pay” category.
Affordability
However, TPN said the “partial payment” category was rising “at a disturbingly faster pace” to 11.79 percent in the first quarter from 9.65 percent in the fourth quarter.
TPN said this was an indication that tenants were still endeavouring to make payments but affordability was becoming increasingly difficult.
It added that the question of affordability continued to surface in both the overall categorisation of rent by rand value and the very low rental escalation being experienced in the market.
TPN categorises tenant behaviour across five rent-value bands and noted that 81 percent of tenants continued to rent for less than R7 000 a month.
“Over the past two years we started noticing an upward migration of tenants who rented for under R3 000 to R7 000 a month but that trend has completely reversed this quarter,” it said.
TPN said rental payment behaviour deteriorated across all five rand-value categories but one of the more concerning aspects for landlords was that almost 10 percent of tenants in the lowest bracket of rental below R3 000 a month did not pay rent.
It said this trend continued to inch higher every quarter, adding that only 51.54 percent of tenants in high income rentals above R25 000 a month paid their rent on time and this trend also continued to deteriorate.
TPN said the rental price bracket of above R25 000 a month was responsible for the highest level of impairment at almost 25 percent, with 15.29 percent partially paying their rent and 9.02 percent not paying their rent at all.
However, TPN said landlords with residential properties in the R12 000 to R25 000 rental a month segment, which accounts for 18 percent of all residential rental properties, were the biggest losers in the first quarter of this year, with the percentage of tenants in good standing declining by 1.81 percent.
Only 4.76 percent of tenants in the R3 000 to R7 000 rental segment were not paying any rent at all.
TPN said the Western Cape still had the best regional performance in terms of rent collection with 87.94 percent of tenants in good standing and bucked the trend with double digit rental escalation of 11.02 percent.
The average national rental escalation was 3.29 percent in the first quarter.
The North West had the lowest percentage of tenants in good standing at 81.43 percent, followed by the Free State (82.28 percent), KwaZulu-Natal (82.32 percent) and Gauteng (83.89 percent).
TPN added that demand nationally for rental property outstripped supply.
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