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October/November 2016
Housing
T
he database statistics are
based on one million tenants.
This give a clear picture on ten-
ant behaviour, age, defaults and how
tenants pay their rent, defaults etc.
Millennial tenants are long terms
tenants born between 1980 and 1985.
Millennials rent for longer than any
previous generation. Almost 80%
of tenants rent for less than R7 000
per month, this is the sweet spot for
developers. Tenants start moving
out of rental accommodation at the
age 30. Research shows that most
females divorce at the age of 39 and
for men at 43.
Rental vacancies nationally are
approximately 5,07%; in the under
R3 000 per month the vacancy rate
is 4,75%; in the R3 000 to
R7 000 market it drops
to 4,31%; the R7 000 to
R12 000 market the va-
cancy rate is 5,55%; and
rentals over R12 000 per
month the vacancy rate is
highest at 12%.
Demand outstrips sup-
ply in the Western Cape
demand is severely con-
strained, demand sits at
92% and supply only 37%.
Tenant behaviour shows
that most tenants are in
good standing and paying rent is a
priority. Rental escalations are heavi-
est in the Western Cape at 12,13%
compared to 3,23% in Gauteng and
3,59% in KwaZulu-Natal.
Dickens says, “Rental payments
are the first ones that tenantsmake in
the Western Cape because there are
somany peoplewaiting for affordable
accommodation.”
Payment profiles show that rental
payment behaviour differs between
provinces with the Western Cape
showing that 78,22% pay on time;
compared to 60,21% in the Free State.
In Gauteng 7,55% of tenants pay
during the grace period compared to
3,77% in theWesternCape. InKwaZu-
lu-Natal 13,99% of tenants paid late
with theWestern Cape recording only
7,53%. The Free State recorded the
highest number of tenants making
partial payments at 12,25% and the
best provincial performer was the
Northern Cape at 7,52%. Provinces
where tenants did not pay rent is led
by the Free State at 8,67% compared
to the Western Cape at 2,81%. Finally
the best performing province was the
Western Cape showing 89,52%of ten-
ants are in good standing compared
to 78,98%of tenants in the Free State.
Dickens says that the worst payers
are those rentals over R25 000 per
month. She concludes that the best
tenant behaviour is in the R3 000 to
R7 000 market, with low escalations
and low vacancies. But the R7 000 to
R12 000 category is the one to watch
in the future.
Managing Director of Trafalgar
group of Properties, Andrew Schafer
says that arrears in some portfolios
showed less than half a percent ar-
rears because of shortage of accom-
modation. Schafer says, “In older
buildings in the inner city retrofitting
is expensive and we find some utili-
ties are inordinately high and divided
across the units created conflict with
tenants. It is much easier to recover
90% of utility consumption.”
Ingrid Van Biljon, Principal Owner
of Zeiri Properties and CEO of Inter-
national Housing Solutions Property
Management says, “Tenants are picky
and it is a highly competitive market.
Tenants will move if they can save
R200 per month. Where there is lim-
ited space available such as the CBD
they will remain. But on new devel-
opments tenants have a much wider
choice and can move around.
The value adds such as fitted
kitchens, cupboards, vanity and
mirror, and security play a large
role in terms of rentals andwhat
the landlord or investor offers.”
Grant Harris, International
Housing Solutions Property
Management Managing Direc-
tor, points out that high rise
versus suburban – credit risk
is lower in the inner city and
control access with biometric
single point of access. The battle
on the townhouse side is that
the collection procedure is far more
difficult.
Rob Wesselo, Managing Director
of International Housing Solutions
concludes, “Our society is getting
used to renting, with the age demo-
graphics shifting and tenants renting
for longer, they don’t have to buy and
it may not always be the right deci-
sion. Rentals in affordable housing is
low risk and city properties have 1%
vacancies and arrears. The product
is becoming more vanilla and we are
excited to see where this part of the
market takes us.”
■
Michelle Dickens, Managing
Director of TPN credit bureau
shared insights on the South
African Property Rental Market
and rental payment profiles.
Tenant
behaviour