Some tenants are more than six months behind on their rent, with the residential rental market’s recovery after the hard lockdown in the second quarter of 2020 taking a knock.
Many tenants were struggling to catch up on rent arrears despite being employed when the restriction on movement was lifted in May 2020, TPN Credit Bureau CEO Michelle Dickens said.
“The rental relief provided by residential landlords in 2020 is reflected in the declining number of tenants that are more than three months in arrears. However, rental relief was a short-term solution to assist tenants who had lost some, or all, of their income.
“Once the restriction of movement was lifted in May 2020, TPN data reveals that tenant arrears shot up in value to new records, with 13% of tenants in arrears now more than six months behind on rent.
Pressure in the lower rental segment
“Although tenant payment performance has shown a steady improvement from the third quarter of 2020, indications are that this improvement has now slowed down,” she said.
“Overall, the residential rental market’s recovery after the shock of the hard lockdown in the second quarter of 2020 has appeared to flat line, with the sector now characterised by diminishing demand, increased vacancies and lower rental escalations.”
Dickens said residential rental tenants continue to downscale and the number of tenants in good standing from a payment performance perspective are still not back to pre-Covid levels.
TPN’s data for the first quarter of 2021 reveals that the worst performing category of tenants from a payment performance perspective are those in the more affordable rental market.
Two-thirds of tenants rent for less than R7,000 per month.
Rentals below R3,000 per month remained under pressure with only 65.73% of tenants in good standing. “A concerning 17.76% of tenants in this category are unable to make any rental payment contributions.”
The R7,000 to R12,000 rental per month category, however, showed growth of 23.3% with 84.37% of tenants in good standing and only 4.86% unable to make any payment at all.
“This category clearly represents a sweet spot for landlords,” Dickens said.
Shift in spending patterns
According to the data, consumer spend has shifted to hardware and furnishings as more people work from home.
According to FNB’s card transaction data, hardware and furnishings saw a 124% increase between January 2020 and January 2021.
Medical and pharmaceutical spend increased by 118% and general retail spend increased by 111%.
“Spend on groceries, automotive and apparel, on the other hand, remained fairly flat in comparison in this same period,” Dickens said.
Industries with the biggest losses included dining out and entertainment (down 82%), fuels and tolls (down 84%) and tourism (down 50%).
Dickens said during the period leading up to the pandemic, consumers in good standing with credit bureaus were in decline, dropping to 57.1% in 2019.
“Job losses and income vulnerability acted as a catalyst to spark industry-wide payment holiday customer support and rental relief. Ironically, the payment holidays rolled out in 2020 actually improved the number of consumers in good standing to 62.6%.
“However, these were only ever intended as short-term relief measures. By the first quarter of 2021, consumers in good standing had once again started to slide to 61.8%.”