Picture: SUPPLIED
Picture: SUPPLIED

More residential tenants are failing to pay their rent on time, highlighting the economic pressure on the South African consumer, say experts.

Despite this, private and listed real estate companies are buying properties to let. Experts say there is huge demand for affordable rental housing and entry-level housing for the middle class.

The TPN Credit Bureau has released data showing that the percentage of residential tenants who pay their rent — including utility bills — on time deteriorated six percentage points to 66.08% in the first quarter of 2017, from 72.52% in the third quarter of 2015.

The bureau’s latest quarterly residential rental monitor attributed this deterioration to interest-rate hiking, a slowdown in disposable income growth and indebtedness of households.

TPN said the year-on-year growth in real household disposable income dwindled from 5.9% in the first quarter of 2011 to 0.9% in the fourth quarter of 2016, driven largely by weak economic growth and a rising personal income tax burden.

Jonathan Kohler, CEO of Landsdowne Investment Properties, which offers property management and development services, said landlords were encouraged to do as much research as possible before signing on tenants.

"Currently, the R4,000-to R8,000-a-month rental market is highly attractive to people looking to buy one or two properties and rent them out.

"There is steady demand from people entering the professional working world. We operate in this space and have generally avoided cases with non-paying tenants. It is best to establish that a potential tenant is employed, has a good credit history and a record of paying rent on time. This is because it can be difficult to get unpaid rent form tenants later on.

"The law allows people to cancel leases with very little notice. Rather put in effort and work with agents if necessary before taking on a tenant in order to mitigate the risks of nonpayment later," said Kohler.

Of the 33.92% of nonpaying tenants, about 24.71% did not pay their basic rent or utility bills at all. About 8.8% of tenants did not pay utility bills, which averaged R500. Some 1.93% of nonpayers had not paid their basic rent for two months in a row.

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