It is a sign of the times, with the cost of petrol, water and electricity increasing – that people just can’t afford rent these days – and it seems to have worsened in the last year.
PayProp, an automated rental payment and reconciliation platform, has released its Rental Index for Q1 of 2018. The first quarter of 2018 indicated an important new trend – people defaulting on their rent has worsened in the past 12 months.
The platform has measured a national increase in the percentage of tenants in arrears from 18.5% in April 2017 to 23.2% in March 2018. Effectively, this means only 76.8% of tenants pay their full rent each month – meaning that 1 in 4 do not.
“What makes it worrying is that these are tenants who have been vetted and approved by estate agents,” PayProp said.
The Western Cape has the lowest incidence of tenants who do not pay their rent in full. Nineteen percent of tenants fall into this category, with the remaining 81% remaining in good standing.
The Northern Cape has the highest percentage of tenants in arrears, and is closely followed by the North West province.
The most expensive rental bracket (over R15,000) has the lowest percentage of arrears relative to rent (78.4% in Q1 2018), but does not have the lowest percentage of tenants in arrears.
Nationally, 31% of tenants rented property for between R5 000 and R7 500 in the first quarter of 2018. The scale of tenants in arrears sits at the low end of the scale, at 22.4%. The lowest rental bracket, which is between R1 000 and R2 500, has the lowest percentage of tenants in good standing and the highest percentage of arrears relative to rent.
Johette Smuts, head of data and analytics for PayProp South Africa, emphasized the importance of finding good tenants.
In most provinces, brackets with a high percentage of tenants in arrears make up a small part of the total tenant population. The only exceptions are the Western Cape, Northern Cape and the Eastern Cape. These provinces have a more substantial portion of the tenant population renting in the high arrears bracket.
Credit scores and data may not accurately predict a tenant’s rental payment behavior, Smuts advices. To determine whether an applicant will be a reliable tenant, credit scores should be used in combination with arrears data.
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