Johannesburg - There was a worsening in rental payment trends in the residential market in the fourth quarter of last year.
Credit bureau TPN described this as “a worrisome change in tenant payment behaviour for the first time in nearly three years”.
TPN’s latest rental payment monitor said this reversal was a sudden change for landlords and property managers who had been enjoying an unusually long period of improving rental payments. This culminated in 86 percent of tenants deemed to be in good standing in the second and third quarters of last year.
Although the bureau said this figure slipped only slightly to 85 percent in the fourth quarter and 72 percent of tenants remained in the “paid on time” category, the deterioration was reflected in the movement of tenants who “paid late” to the “partially paid” segment.
The percentage of tenants who “paid late” declined to 15 percent in the fourth quarter from 17 percent in the previous quarter, while the percentage who made only a “partial payment” was at 12 percent in the fourth and third quarter last year after being at 10 percent in the first quarter.
TPN said this highlighted a growing multitude of over-indebted consumers who were unable to make full and timeous payments on credit and monthly living expenses. “The decline might be slight but nonetheless could be seen as an early warning sign of trouble ahead,” it said.
The bureau said landlords and property managers had been treated to three years of good and improving tenant behaviour but they had now seen the first decline in behaviour.
“A brief look into 2014 raises warning flags, of which the first was an unexpected increase in interest rates. Although this may not have an immediate or direct bearing on the rental amount paid, it does impact on tenants’ overall financial budgets, resulting in deteriorating rent collection.”
However, TPN said it was worth mentioning that “partially paid” tenants, although not categorised in the “in good standing” category, showed an effort to make some kind of payment for the month.
Tenants in the “did not pay” category increased to 7 percent from 6 percent in the third and second quarters, which was the lowest level for this category on record, it said.
Gauteng, KwaZulu-Natal and the Eastern Cape, three of the major rental provinces, experienced a deterioration in tenant payment behaviour, with only the Western Cape remaining flat. Gauteng and KwaZulu-Natal had a combined 56 percent of the country’s tenants. There was a 2 percentage point deterioration in tenants in good standing in Gauteng, to 84 percent, and 0.5 percentage point dip in KwaZulu-Natal.
TPN said the payment behaviour in all rental price brackets deteriorated in the fourth quarter, with the below R3 000 a month rental bracket performing worst.
In this bracket, 10 percent of tenants did not pay, with identical percentages making a partial payment and paying late.
TPN said it was monitoring the trend of tenants looking for more affordable properties.
It said 87 percent of tenants now rented for less than R7 000 a month compared with 85 percent of tenants in this bracket six months ago.
A similar shift was taking place at the lowest end of the market, where the percentage of tenants in this rental bracket had increased to 25 percent from 23 percent over the same period, it said.