Neelam Rahim | neelam@radioislam.co.za

2-minute read
12 August 2023 | 18:00 CAT

Image: SA Property Insider

Although the residential rental property market has remained surprisingly resilient despite consumers’ financial stress in recent quarters, the number of tenants in good standing deteriorated in the first quarter of 2023 in all provinces, according to TPN’s latest Residential Rental Monitor report.

Waldo Marcus, Industry Principal at TPN Credit Bureau, says the resilience has been driven by high-interest rates, which has dissuaded potential buyers. The expectation of further interest rate hikes will retain a healthy demand for residential property.

TPN publishes The Residential Monitor Report every quarter, which aims to look at the residential market and its national performance for investors, property professionals and estate agents.

Touching down on reasons for the financial health dropping of tenants, Marcus said post covid has seen various economic stresses.

“Inflation has been driving the reasoning for the South African Bank to increase rates. The interest rates then filters down into various aspects of the economy,” he says.

TPN’s data reveals that tenants in good standing have declined slightly for three consecutive quarters as economic challenges filter into households. This mirrors the result of the National Credit Regulator’s age analysis which indicates that almost all consumer credit types in good standing deteriorated slightly in the same period. TPN’s Squat Index, defined as the number of tenants who, monthly, fall into a category of non-payment, has also seen an increase in the last two quarters.

The residential market recovered faster than most property sectors post Covid-19 with reduced vacancy rates and steadily recovering rental escalations. The sector’s recovery was assisted by an aggressive interest rate hike cycle which dissuaded potential buyers from entering the property market.

Rental escalations have been recovering since mid-2021 as demand for residential rental property grew, providing property owners with an opportunity to play catch-up with the consumer price index (CPI), which, at the end of March 2023, was 7.1%.

“A pause in the interest rate hiking cycle by the South African Reserve Bank (SARB) in July 2023 for the first time since November 2021 will have provided some relief to a severely stretched consumer base,” says Marcus. “We expect residential rentals to continue their gradual climb but to slow towards the end of 2023 as the balance between rental growth and vacancies becomes a finer balancing act.”

Listen to the full interview on Your World Today with Moulana Shuayb Lasanya.