Late rent payments on the rise in South Africa - CNBC Africa

Late rent payments on the rise in South Africa

Southern Africa

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House for rent. PHOTO: Getty Images

“This is the first time we have seen deterioration in three years and that’s why it’s worrying,” Michelle Dickens, managing director of TPN Credit Bureau told CNBC Africa.  

This follows after TPN released their latest residential rental monitor, indicating that tenants in good standing have dropped from 86 per cent to 85 per cent, and that more late payers are moving into the partial payers’ category.

(READ MORE: S.Africa’s rentals slow to show price growth)

The two best performing provinces are the Western and Eastern Cape, while Gauteng and Kwa-Zulu Natal remain the worst.

“Interestingly those two provinces [Gauteng and Kwa-Zulu Natal] make up 56 per cent of all the tenants in South Africa. Forty per cent of tenants are in Gauteng and 16 per cent are in Kwa-Zulu Natal alone,” explained Dickens.

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While this slight change in the data may be a concern, she added that it is nowhere near as bad as the 71 per cent mark of late 2008 to 2009.

(WATCH VIDEO: Rentals playing mild catch-up with residential property values)

“The trend hasn’t hit so much on the paid-on-time tenants, we’re still seeing 72 percent of our tenants on the paid-on-time category,” she added.

The rental monitor survey, which has been conducted since 2007, currently has a contribution list of 7,000 members, including large property companies such as Just Letting, Pam Golding and the Trafalgar group. 

The database contains over 300,000 tenant payment profiles across South Africa, from those paying below 3,000 rand rent per month, up to 100,000 rand per month.

Surprisingly, Dickens added, the majority of tenants in the lower end of the rental market, those that pay below 7,000 rand rent per month, are in good standing.  

(WATCH VIDEO: Residential letting trends for 2014)

One of the biggest challenges to the rental property space, although rare, is that of squatters.

“A squatting tenant is a tenant that has been on the property for four months in a row without paying rent. That requires legal costs as well as a loss of rent to get the tenant out of the property,” said Dickens.  

“Nine out of ten times a tenant who defaults and is given notice to vacate will in fact move out of the property. It’s only two per cent of tenants that will actually remain on the property.”

In addition, changes to government laws continue to make it even more difficult for landlords to remove tenants from their properties.

“It’s not that the landlord can’t get the tenant out of the property, it’s just that the process is a lot longer, and as a result more costly with attorneys involved,” she added. 

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