Consumer Information

Author:  Michelle Dickens
Chief Executive of TPN Credit Bureau
28 March 2021

Here’s how many South Africans are behind on their rent

Data from credit bureau TPN shows that rental payments are still falling behind the pre-lockdown levels seen at the start of last year.

This reflects just how severe the deep economic contraction of the second quarter of 2020, and its resultant tenant employment and income loss actually was, said Michelle Dickens, chief executive of TPN Credit Bureau.

TPN data shows an improvement in tenants’ good standing from a low 73.5% of tenants paid up in the second quarter, a slight increase to 74.57% in the third quarter, to 77.6% in quarter four.

Preliminary data for the first quarter of 2021 points towards further improvement although not quite to pre-lockdown levels above 80%. Landlords with properties in the R7,000 to R12,000 rent per month category are seeing 83.63% of their tenants paid up.

However, tenants at the low end of the market with rentals below R3,000 per month are still in distress with only 65.61% in good standing with their landlords.

This segment is populated by the most financially fragile part of the tenant population, said Dickens, with very few financial ‘buffers’ with which to weather storms that may translate into income loss.

Deterioration

While the residential tenant payment performance recovery is on the right trajectory, current figures remain well below those recorded pre-lockdown, indicating that both the economy and the employment rate is battling to fully recover after Q2 2020 and the strictest lockdown.

Dickens said that the margin of error for complacent tenant administration has, even prior to the hard lockdown, been under threat for some time.

“Low escalations and higher than inflation property costs are slowly eroding profit for some landlords who have not been proactively managing their portfolios,” she said.

Citing payments data from BankservAfrica, Dickens said that the number of ‘banked’ employees continues to shrink, particularly in the lower end of the pay scale.

However, while the net result is less people on payroll, those employed are seeing an improving average take-home pay of R15,821, which is up 4.75% year on year.

Rising vacancies

Financial pressure is not only reflected in tenant payment performance but also in a steadily rising residential vacancy rate. Dickens said out that a shrinking pool of workers is reflected in growing residential vacancies.

Vacancies are at 13.31% in the first quarter of 2021. The worst affected segment of the residential property market is the lower rental category of less than R3,000 rent per month.

Dickens said that TPN estate agents and landlords report an 18.45% vacancy rate is this category, a figure which corresponds with BankservAfrica data concerning declining numbers of lower-paid earners.

“Financial pressure has resulted in certain rental households pro-actively ending their leases in rental properties and seeking alternatives such as moving into shared accommodation or moving back into parents’ home until finances improve,” she said.

As far as vacancies are concerned, the middle R7,000 to R12,000 per month segment was again the ‘sweet-spot’, recording a relatively low 10.23% vacancy rate in the first quarter of 2021.

The formal rental housing market remains a vital source of accommodation to over three million households in South Africa.

However, Dickens said that job security and income growth are necessary to ensure that landlords have a strong pool of tenants who have both the necessary creditworthiness in place and can afford rental housing.

“With the month-on-month extension of the National State of Disaster entering its second year, evictions now require that if the courts decides to grant the eviction order prior to the end of the National State of Disaster, the court must consider the health of all individuals and restriction of movement, the impact of the disaster on the parties and their immediate access to an alternative place of residence.

“These are all additional burdens on the landlord which are not ordinarily their responsibility,” said Dickens.

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