Although you could be forgiven for thinking that many South African tenants are rouges who go out of their way to avoid paying rent, a recent report released by Tenant Profile Network (TPN) indicates otherwise.
The figures that highlight the rental goings-on during the second quarter of 2012 indicate that 81 percent of tenants were deemed to be in good standing with their landlords. Of this figure 68 percent of tenants paid their rents on time and 13 percent paid late. Only 11 percent of tenants did not pay the rent at all and eight percent made a partial payment.
The good news is that the figures reflecting ‘good tenants’ have remained identical for the preceding two quarters and are a far cry from the catastrophic period four years ago when the residential rental market plummeted and only 74 percent of tenants fell into the good standing with their landlords category and only 54 percent of tenants paid their rentals on time.
The rising cost of living is undoubtedly affecting some people more than others and as expected those renting lower priced properties have been hit the hardest. The stats indicate that 13 percent of tenants renting accommodation for under R3 000 paid late. However, interestingly, it is not only those in the lower price brackets that have been affected and the report highlights that 17 percent of those who rent property costing over R12 000 per month were late payers. Disturbingly, the statistics also reveal that 18 percent of those renting property for less than R3 000 per month and 12 percent of those renting property for more than R12 000 per month did not pay their rent at all.
Tenants in the R3 000 to R7 000 category and those who pay between R7 000 and R12 000 per month appear to be the most stable and the statistics reflect that 84 and 85 percent, respectively, were rated as tenants in good standing.
Where the rental property is situated also has a bearing on tenant behaviour. The report indicates that landlords in Gauteng and KwaZulu-Natal face the most challenges. It appears that 10 percent of delinquent tenants in Gauteng are more liable to make a partial payment while 13 percent will skip a monthly payment altogether. However, 15 percent of delinquent tenants in KwaZulu-Natal show a higher probability of skipping payment with only 7 percent electing to make a part payment.
The Western and Eastern Cape have proved over time to have the most reliable rental payment performance and 86 and 88 percent of tenants fell into the good standing category. When compared against the national average of 81 percent these figures are impressive.
The demand for residential rentals will always be high. The key for investors is to select properties in the most appropriate value bracket and location and to then place quality tenants who have been properly screened. The need to conduct an affordability assessment is vital as a tenant’s ability to make a full and timeous rental payment is not only based on their desire to make such payments as their financial position plays a critical role.
Without a full understanding of the financial position of a perspective tenant, no investor can access if the asking rental is within the tenants means.