The second quarter of 2012 saw no change in certain key indicators that largely define the landscape of South Africa’s residential rental market‚ results of the latest Residential Rental Monitor show.
Most importantly 81% of tenants were once again deemed to be in Good Standing with their landlords‚ with the make-up of the bracket comprising 68% in the Paid on Time sub-category and 13% Paid Late.
TPN Credit Bureau‚ which compiles the figures‚ noted that‚ interestingly these figures have remained identical for the preceding two quarters; “not necessarily a bad situation when compared with the catastrophic period four years ago when the residential rental market plummeted to just 74% of tenants in Good Standing and only 54% in the Paid on Time category.”
Quarter 2 also marked the shedding of a further 50 basis points in the prime lending rate to 8.5%. Historically this would have contributed to an improvement in rental collections‚ albeit with a nine month lag‚ but several factors currently point towards a less optimistic outlook:
- The National Credit Regulator’s credit bureau monitor Q1 2012 indicates a further small decline of 0.2% of consumers in good standing to 53.6%. During industry workshops and subsequent feedback sessions‚ the NCR warned of the possibility of a looming unsecured credit bubble
- TransUnion’s Consumer Credit Index‚ which declined from 51.2 in Q2 to 48.6 in Q3 2012 reflects rising consumer loan impairments and greater use by South African households of revolving credit to supplement monthly budgets. This index now reflects mildly deteriorating credit health
- SARB Quarterly Bulletin indicates the household debt to disposable income ratio started to rise again; up from 74.6% to 76.3%
- There are concerns of food shortages with commentators suggesting an average 15% increase in the cost of food
- Eskom has proposed a 15% annual increase in Electricity until 2017
“Increased pressure arising from such factors will no doubt influence the budgets of most tenants and TPN expects those at the lower end of the market in the rental category of R3‚000 per month and below to be most affected‚”” TPN said.
Currently‚ it added‚ collections categorised by value showed slight improvements across all the rental brackets‚ although both the lower and upper segments of the market remain under the most pressure.
• Tenants in the below R3000 per month category have a high rate of non-payment with 18% or nearly 1 in 5 tenants unable to pay any amount towards the rent. It appears investors are performing inadequate affordability assessments as the rent is considered of relatively low value
• 17% of tenants in the R12000 plus category are late payers; this payment behaviour requires the landlord to have cash flow available to fund monthly costs while waiting for incoming tenant payments
• Tenants in the R3000 to R7000 and the R7000 to R12000 categories continue to perform best with 84% and 85% respectively in Good Standing. These tenants appear the most stable and are affected less intensely by changing market conditions
