Pay­ment un­cer­tain­ties for home rental

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

THE OVER­ALL credit pro­files of many res­i­den­tial prop­erty ten­ants were de­te­ri­o­rat­ing and un­less this trend sta­bilised, it was sim­ply a mat­ter of time be­fore rental pay­ments would be neg­a­tively af­fected, credit bu­reau TPN has warned.

It said there had been a 4.2 per­cent shift in ac­tive ten­ants from an ex­cel­lent to good over­all credit pro­file into an av­er­age credit pro­file.

How­ever, TPN said it was positive that there had not been any sub­stan­tial in­crease in the size of the group of ten­ants with be­low av­er­age to poor credit pro­files. In ad­di­tion, TPN said ten­ants in good stand­ing in the third quar­ter of last year re­mained favourably po­si­tioned at 84 per­cent from 85.08 per­cent in the sec­ond quar­ter af­ter the shock 2.8 per­cent­age point de­cline to 82.17 per­cent in the first quar­ter.

Ten­ants in good stand­ing in the third quar­ter com­prised the 66.57 per­cent of ten­ants who paid on time, 6.24 per­cent who paid dur­ing the grace pe­riod and 11.2 per­cent who paid late.

More fas­tid­i­ous

Com­ment­ing fur­ther on ten­ants in good stand­ing, TPN said land­lords had be­come more fas­tid­i­ous in ten­ant se­lec­tion and it could be ar­gued that there was a re­lated in­crease in the place­ment of bet­ter qual­ity ten­ants, who ul­ti­mately paid well.

Res­i­den­tial prop­er­ties in the R7 000 to R12 000 rental price band had the high­est per­cent­age of ten­ants in good stand­ing at 88.37 per­cent, of which 73.52 per­cent paid on time, fol­lowed by the R3 000 to R7 000 rental price bracket at 86.47 per­cent.

TPN said rental pay­ment per­for­mance in the less than R3 000 a month rental price cat­e­gory had de­te­ri­o­rated con­spic­u­ously and had the low­est per­cent­age of ten­ants in good stand­ing at 75.87 per­cent, with 11.52 per­cent of ten­ants not pay­ing rent in the third quar­ter and only 57.7 per­cent pay­ing on time.

The credit bu­reau said al­though ten­ants in the ex­clu­sive R25 000 or more rental bracket also re­mained a chal­lenge with only 53.27 per­cent pay­ing on time, an even big­ger prob­lem was the 14.67 per­cent in this cat­e­gory who only made par­tial pay­ments, fol­lowed by the rental band of more than R25 000 a month at 77.31 per­cent.

TPN said 79 per­cent of the res­i­den­tial ten­ant pop­u­la­tion rented for less than R7 000 a month, with 55 per­cent of these ten­ants rent­ing prop­er­ties for be­tween R3 000 and R7 000. How­ever, TPN said there had been a slow growth of ten­ants mi­grat­ing into the R7 000 to R12 000 a month rental price cat­e­gory.

It said the Western Cape re­mained a very en­tic­ing mar­ket for buy-to-let in­vestors, which was damp­ened only by a sub­dued gross yield of 7.71 per­cent in the Cape Town Metro. FNB said in a sep­a­rate re­port the buy-to-let mar­ket re­mained medi­ocre and pri­mary res­i­den­tial de­mand re­mained king.

John Loos, a house­hold and prop­erty sec­tor strate­gist at FNB, said buy-to-let pur­chases were es­ti­mated by es­tate agents to have de­clined to 8.55 per­cent of to­tal home buy­ing in the fourth quar­ter from 10.1 per­cent in the pre­vi­ous quar­ter.

Loos said that in the cur­rent weak eco­nomic en­vi­ron­ment, with con­sumers fi­nan­cially con­strained, it was re­al­is­tic to ex­pect sec­ondary home buy­ing to be some­what on the “back­burner”.

Ten­ants’ over­all credit pro­files are de­te­ri­o­rat­ing and rental pay­ments will soon be af­fected.

TPN said the Western Cape achieved the high­est av­er­age rental of all the prov­inces at R7 463 a month and this mar­ket con­tin­ued to im­prove, with 89.64 per­cent of ten­ants in good stand­ing and dou­ble digit rental es­ca­la­tions of 13.15 per­cent.

It said Gaut­eng had the lion’s share of the rental mar­ket pop­u­la­tion and re­mained an at­trac­tive seg­ment de­spite ten­ants in good stand­ing, slid­ing be­low the na­tional av­er­age to 83.14 per­cent in the third quar­ter and also ex­pe­ri­enc­ing be­low av­er­age rental es­ca­la­tions of 4.03 per­cent.

TPN said there was a com­mon mis­con­cep­tion the stan­dard rental es­ca­la­tion was 10 per­cent a year across the coun­try when the high­est na­tional es­ca­la­tion rate was 9.35 per­cent in the third quar­ter of 2013. How­ever, the na­tional rental es­ca­la­tion rate had been on a steady de­cline since then, TPN said.

Rental es­ca­la­tions in­creased year-on-year in the third quar­ter by 4.25 per­cent.

PHOTO: NI­CHOLAS RAMA

Flats To Let in Johannesburg CBD. Res­i­den­tial prop­er­ties in the R7 000 to R12 000 rental price band had the high­est per­cent­age of ten­ants in good stand­ing of which 73.52 per­cent paid on time.

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