Data from the specialized credit agency TPN shows that while the number of tenants per day has recovered somewhat from the lows reached during the close of last year, there is still a long hangover of delinquent tenants.
Residential tenants in good condition in the first quarter recovered to 78.4% from a low of 73.5% reached during the second quarter of last year. Preliminary data shows that this has risen to 79% in the second quarter, “indicating a slow and continued recovery.”
However, of the tenants in arrears, 54% of them, more than half, are more than one month in arrears. In 2015, this figure was 40%. It is clear that the effect of lockdowns due to the Covid-19 pandemic, where many received no income and hundreds of thousands of people lost their jobs, will weigh on the residential rental market for some time.
There has been some improvement since the middle of last year; TPN says that “there is a visible change of tenants with more than three months of delay. Similar to consumer credit, rent relief was a short-term solution to help tenants who had lost some or all of their income during a period when they were restricted from moving. ”
However, tenants in arrears for six months or more have remained stubbornly high at 12.9%.
In other words, out of 100 residential tenants, 78 are up to date.
TPN defines this as when “rent is paid on time and in full.”
“In other words, your account is fully settled with no account arrears on the last day of the month.”
Of the 22 out of 100 tenants who are delinquent, about 12 are more than a month behind on their rent and three are six months or more behind.
As an aside, TPN’s illegal occupancy indicator (which tracks the number of residential tenants more than four months late in their rent) has more than doubled from historic levels of 0.6% to 0.8% to as high as 1.8% during full close last year. . At the end of the first quarter, this figure was 1.4%.
Different market segments are behaving differently, unsurprisingly.
TPN says that “rents below R3,000 per month remain under pressure with 65.73% of tenants in good standing.”
“In fact, a very significant 17.76% cannot make any contribution to the payment of rent and occupy the category of payment ‘did not pay’”.
He says that the so-called “sweet spot”, properties with rent between R7,000 and R12,000 per month, “has risen to a 23.3% market share, and owners will be happy with 84.37% of those. tenants in good condition, a mere 4.86% who could not make any payments ”.
Supply that exceeds demand
TPN CEO Michelle Dickens says the residential rental demand rating has deteriorated to 53 from 88 in 2016.
The supply rating increased from 48 to 68 during that same time period, leading to the current situation where “supply exceeds demand [and] which gives a market force of 42 ”. This is substantially below the balance mark of 50.
The latest data shows that the vacancy rate remains stable at around “13% during the last three quarters”, while the escalations are negative at -0.27% in the second quarter.
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The number of renters per day is still well below the more normalized levels of 85% between 2013 and 2016. Before closing, the number of renters per day was 81.5%.
What is concerning to homeowners buying to rent is the fact that this number has been steadily deteriorating over the four years between 2016 and the start of the global pandemic last year.
Rent remains the top priority over all other types of credit except one (mortgages). This is evident in the large gap between current renters and consumers with current credit records.
TPN says that “in the run-up to the pandemic, reputable consumers on credit bureaus were in decline, falling to 57.1% in 2019.”
“Vacation payment [rolled out in 2020 and which were recorded on the credit bureaus without adversely affecting consumer credit profiles] it had the effect of actually improving the number of healthy consumers to 62.6%. The paid holidays were only a short-term relief and the consumer good situation has started to decline again, ending at 61.8% in the first quarter of 2021. ”