Good tenants are declining
FLATS, TOWNHOUSES, HOUSES: LANDLORDS FACE SHRINKING POOL OF ON-TIME PAYERS
Delinquencies increase to 18.24% in second quarter of this year from 14% in the third quarter of 2013.
Tenant Profile Network (TPN) credit bureau reports the slow, steady deterioration in the percentage of residential tenants in good standing, which started in the third quarter of 2013 and continued into the second quarter of this year.
TPN says tenants in good standing peaked at 85.95% in the third quarter of 2013 and deteriorated to 81.77% in the second quarter of this year.
This comprised a combination of 66.15% of tenants who paid on time and in full, 4.72% who paid in the grace period and 10.9% who paid late.
Delinquencies up
Delinquencies increased overall to 18.24% in the second quarter of this year from 14% in the third quarter of 2013.
TPN managing director Michelle Dickens says the deterioration in residential tenants in good standing coincided with the start of the downward business cycle that began in December 2013, which historically has been the longest since World War II.
TPN notes the quality of tenants applying for rent has weakened from 80% to 75.24% on the Credex default score.
“With a similar deterioration in tenants placed, it is clear landlords are experiencing pressure caused by a shrinking pool of quality tenants,” Dickens added.
Economic slowdown hits home
FNB Commercial Property strategist John Loos says the interest rate hiking cycle from 2014 would have had some minor role [in the deteriorating residential tenant profile], but the bigger reason is the slowdown in the economy, disposable income and job creation.
However, he stresses the deterioration in the payment profile of residential tenants hasn’t been severe. Rawson Property Group national rentals manager Jacqui Savage says the PayProp Rental Index for the second quarter of this year shows rental investments may have ceased their downward trajectory.
“Rental growth over the last six months has been virtually flat. That might not seem particularly positive for landlords, but when taken in context with moving average trend lines dating back to 2017, it shows the first reliable sign of an end to the national rentals growth decrease.”