Rental tenants believe they can only pay rent after a 10% reduction
CAPE TOWN - About 88 percent of rental tenants believe they will only be able to afford monthly rentals that’s reduced by 10 percent for the next 12 months, while more than a third say they intend to move for a better deal, due to the impact of the Covid-19 lockdown.
These were according to findings of a survey by digital rental platform, HouseME, among more than 1000 of its tenants and landlords in June and July.
The findings reveal the impact of the Covid-19 lockdown and economic slowdown on the residential property market, in stark black and white, and a major concern is when the payment holidays end.
Property entrepreneur and Only Realty managing director Grant Smee said: “We’ are seeing an excess amount of vacant properties. Tenants have either: been evicted; had to move out due to affordability; or, in the case of Airbnb’s, are vacant due to a lack of tourism. This is particularly evident in Cape Town, our major tourism hub”.
Smee said while evictions had been an ethical “grey area” during lockdown, eviction lawyers were preparing for an influx of cases. He said the topic of eviction, however, remained contentious, and was placing big pressure on both landlords and tenants.
In the HouseME survey, the majority of landlords (85 percent) in the HouseME survey own bonded properties, so it was unsurprising that 37 percent said they could not afford to self-fund more than one month of vacancy, with half of those landlords indicating they could not fund even a single month of vacancy.
However, 41 percent of landlords were expecting rentals to remain unchanged for the next 12 months, and 24 percent expected rentals to increase.
With 28 percent of tenants already having had their income negatively affected, either through job loss or salary reduction, and 21 percent concerned about income security in the next six months, the mismatch of expectations between landlords and tenants was likely to cause tension when it comes to property pricing and negotiation, said HouseME chief executive Ben Shaw.
“A major concern for landlords, banks and property managers is what will happen when the payment holidays end. Landlords who have had the benefit of delaying home loan repayments may now be forced to ruthlessly pursue rental to cover their payments,” he said.
Tenants who had rental payment holidays could now also be within days of default.
“We expect the national default rate to spike in August and September and this will have a knock-on effect on property value, credit records and general affordability by the consumer,” said Shaw.
A quarter of all landlords surveyed listed non-payment of rental as their biggest worry going forward, followed by vacancies (19 percent) and late payments (16 percent).
“The economic recession is already biting hard among tenants, with some respondents saying that moving costs are prohibitive given their current liquidity position, and some even citing petrol and travel costs for viewings as a barrier,” said Shaw.
Shaw said the pandemic had fast-tracked the move to digital, which was reflected in accelerated adoption of the HouseME platform.
“We have seen an 80 percent jump in units advertised since the first quarter of the year; driven by larger property portfolios – all of whom are now moving digital, seeking the cost efficiencies of a long-term letting platform.
“Our listings climbed from an average of 400 pre-lockdown to more than 750 in July. This was partly due to the influx of fully-furnished holiday-let units now seeking long-term tenants, because they could no longer rely on the short-term market for income.
“This increased supply is likely to further push down rental prices, particularly in major cities – both tourist and business centres – until tourism picks up again,” said Shaw.
Smee said a prolonged buyers’ market had seen a spike in residential property sales since June. “It is important to take a conservative, calculated and logical approach when purchasing or selling a property,” he said.