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Rental payments remain a high priority in South Africa, despite the economic challenges faced by tenants, notes TPN Credit Bureau.
The TPN Residential Rental Monitor for the second quarter of 2022 showed that the property market is fragile, balancing a fine line between demand shift and the ability of consumers to afford any formal rental accommodation.
The South Africa Reserve Bank (SARB) has not held back on its intention to push inflation back to within its targets, increasing the main repo rate by 75 basis points to 6.25% in September 2022. This is expected to slow residential property sales, although prices in certain areas are expected to climb as demand for well-serviced areas remains an attractive asset, said TPN.
Regardless of economic challenges, tenants are in good standing with their monthly rental obligations. Rental obligations improved from 80.78% in the first six months of the year to 82.22% in the second quarter, it reported.
TPN noted that monthly rental payments are considered the second most important household budget credit priority for consumers, second only to mortgages or bond repayments.
Breaking down the different categories of tenants, there has been a noticeable deterioration in good standing in the rental bracket above R25,000 which dropped to 77.38%, said the credit bureau. “This rental bracket traditionally experiences a drop in the second quarter of the year – with the exception of the second quarters in 2019, 2020 and 2021– but strengthens again in the third quarter,” it said.
This is partly attributable to the cyclical nature of tourism, particularly in the coastal regions. This decline correlates to the slowdown in the Western Cape’s good standing figures and partially explains the reduction in KwaZulu-Natal’s good standing for the second quarter, said TPN.
The rental bracket R12,000 to R25,000 has recorded its best-ever good standing to date with a healthy 87% in good standing.
Those paying between R7,000 and R12,000 are even more committed to maintaining their good standing with 88% up to date with their rental payment, exceeding pre-pandemic levels in both 2018 and 2019. It is safe to assume that this rental category has fully recovered from the pandemic, said TPN.
The table below shows the good rental standing by rent value:
In terms of provincial standings, the Western Cape has held steady with its collection of rent and the escalation of its property rates. The home to the Mother City reported a steep rental increase of 4.17% in the second quarter – this sharp increase was however not enough to push tenants away.
Over the second quarter, KwaZulu-Natal’s standing dropped to 80.16% in light of severe flooding across the province in April and May, as well as slow repairs to infrastructure that affected the ability of landlords to collect rent. The province continues to have the highest escalation rate of all provinces at 4.78%, said TPN.
Gauteng only increased rentals by 1.69% compared to the year before. Landlords have eased rentals to ensure higher occupancies, and this strategy is starting to pay off, as reflected in the data, said TPN. “However, Gauteng still struggles to collect rental payments on time with only 80.96% of tenants in good standing.”
Regarding the Free State and North West, rental collections have suffered as unemployment in the provinces remains high.