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The Western Cape has the best tenants

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Statistics reveal this province scores tops for landlords who receive rental payments on time

Western Cape tenants remain the best in the country, with more than 77% paying their rent on time each month.

This is according to TPN’s latest Rental Monitor, which evaluated tenant payment performance during the third quarter of last year.

Overall, when combining the number of tenants in good standing – including tenants who have paid on time, those who paid late, and those who received a grace 
period in which to pay – the province tops the list with a figure of 89.26%. This is higher than the national average of 83.47%.

Detailed statistics for the province show:
* 77.55% paid on time.
* 3.53% paid after a grace period.
* 8.18% paid late.
* 8.02% made partial payments.
* 2.72% did not pay at all.

The Eastern Cape follows in second place with 86.92% of tenants in good standing. The Free State finished in ninth position with 78.89% of tenants in good standing and 9.11% who did not pay their rent at all in Q3 2017.

In the report TPN managing director Michelle Dickens says the Western Cape has outperformed the rest of the country in many ways in recent years, attracting stronger inflows of skilled and high-income migrants into the province, showing better tenant payment performance and stronger average house-price growth than any other major region. It has also experienced stronger rental inflation than the other eight provinces.

Nationally, tenant performance “turned for the better”, but this is not yet evident of an improving trend. 

Dickens says: “In recent quarters, we have been expressing the expectation that residential tenant payment performance could begin to improve mildly after some deterioration since around 2014. While one or two quarters of improvement don’t yet conclusively point to a trend, the third quarter data did show some improvement in performance which is encouraging.”

The percentage of tenants in good standing with their landlords rose from 82.77% in the first quarter of 2017 and 82.83% in the second quarter to 83.47% in the third. 

However, Dickens says paying in full and on time is “the ultimate” for landlords. This figure is at 67.29%, slightly up from 65.78% in the second quarter.

“However, it remains over five percentage points below its 72.52% multi-year high as at the third quarter of 2014. This translates into quarterly declines in the percentage of tenants paying late or requiring a grace period: from 5.67% in the second quarter to 5.32% in the third quarter, the percentage making a partial payment from 10.81% to 10.63%, and those that did not pay from 6.37% to 5.9%.”

Breaking up the figures by rental amount, the report reveals tenants renting properties in the R7 000 to R12 000 price range are the best payers, with a good standing figure of 88.4%. The lowest rental price category, which is that below R3 000, saw the worst good standing performance at 73.5%.

“The R7 000 to R12 000 a month segment remains the sweet spot for landlords, with the highest percentage of tenants paying on time, and has had the best performing rental population since the second quarter of 2012,” Dickens says.

In addition to the Rental Monitor,TPN also released its latest Vacancy Survey for Q3 of 2017. This report shows Western Cape rental properties remain in high demand, pushing up rental prices 8.4% and enabling landlords to be choosy in their tenant selection. 

Dickens says Gauteng appears to have an oversupply of rental stock brought about by large new portfolios coming to the market and resulting in a longer period of time to fill vacancies with properly qualified tenants.

“This is compounded by the fact that Gauteng tenants – with 82.75% in good standing – are less tenant worthy (credit worthy) than their Western Cape counterparts. 

This results in a higher decline ratio, reflective in the very low 3.87% rental inflation.”

The national vacancy rate for Q3 is at 5.80%. While tracking the vacancy rate is still in its early days, Dickens says it is interesting to note vacancies seem to track the trend of tenants recorded in the “did not pay” category per quarter. This may suggest sentiment still plays a large role in tenant placement.

“As tenants in the ‘did not pay’ category increase, landlords or estate agents become wary, and this translates into a more cautious tenant placement approach which pushes up vacancies. As tenant payment behaviour improves, it results in fewer tenants in (this category). When cautious sentiment is relaxed, more tenants are placed and fewer vacancies occur,” Dickens says.

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