The quarterly PayProp Rental Index for Q3 2018 indicates that South African rental growth continues to slow, reaching a level of only 3.25% for the quarter. The data also shows that 37.2% of all rental tenants are classified as high-risk, which PayProp Head of Data and Analytics, Johette Smuts, says is to be expected considering the significant pressure placed on consumers due to increasing inflation – in particular, continuous petrol price increases and the resultant goods and services price hikes.
The PayProp Rental Index has revealed that nationally, rental growth slowed to 4.14% in the last quarter of 2018, vs. 5.39% over the same period in 2017. Nevertheless, it was the first quarterly uptick in the rental growth rate in two years, and also the highest quarterly year-on-year growth for 2018.
Data from the quarterly PayProp Rental Index indicates that older tenants are the ideal tenants for landlords – even though they typically have higher levels of debt, they also have the highest credit scores.
Nearly two out of every five tenants in South Africa are risky. On average, 14.2% of South African tenants are classified as minimum-risk according to their credit scores, while 37.2% are classified as high-risk. PayProp head of data and analytics, Johette Smuts says that according to the PayProp Rental Index from Q3 2018, this high-risk contingent of tenants spend about 33% of their net income on rent.
2019 will see estate agencies facing mounting pressure from property owners and tenants alike. Economists expect inflation to continue to rise for most of the year while economic growth is likely to stay slow, meaning consumers won’t get a break from their woes for at least the next year. PayProp CEO Louw Liebenberg says that agents operating in this economic environment should carefully consider which strategies they adopt to better serve their businesses.