Housing in Southern Africa October-November 2016

Housing

T he database statistics are based on one million tenants. This give a clear picture on ten- ant behaviour, age, defaults and how tenants pay their rent, defaults etc. Millennial tenants are long terms tenants born between 1980 and 1985. Millennials rent for longer than any previous generation. Almost 80% of tenants rent for less than R7 000 per month, this is the sweet spot for developers. Tenants start moving out of rental accommodation at the age 30. Research shows that most females divorce at the age of 39 and for men at 43. Rental vacancies nationally are approximately 5,07%; in the under R3 000 per month the vacancy rate Michelle Dickens, Managing Director of TPN credit bureau shared insights on the South African Property Rental Market and rental payment profiles. Tenant behaviour

In Gauteng 7,55% of tenants pay during the grace period compared to 3,77% in theWesternCape. InKwaZu- lu-Natal 13,99% of tenants paid late with theWestern Cape recording only 7,53%. The Free State recorded the highest number of tenants making partial payments at 12,25% and the best provincial performer was the Northern Cape at 7,52%. Provinces where tenants did not pay rent is led by the Free State at 8,67% compared to the Western Cape at 2,81%. Finally the best performing province was the Western Cape showing 89,52%of ten- ants are in good standing compared

buildings in the inner city retrofitting is expensive and we find some utili- ties are inordinately high and divided across the units created conflict with tenants. It is much easier to recover 90% of utility consumption.” Ingrid Van Biljon, Principal Owner of Zeiri Properties and CEO of Inter- national Housing Solutions Property Management says, “Tenants are picky and it is a highly competitive market. Tenants will move if they can save R200 per month. Where there is lim- ited space available such as the CBD they will remain. But on new devel- opments tenants have a much wider choice and can move around. The value adds such as fitted kitchens, cupboards, vanity and mirror, and security play a large role in terms of rentals andwhat the landlord or investor offers.” Grant Harris, International Housing Solutions Property Management Managing Direc- tor, points out that high rise versus suburban – credit risk is lower in the inner city and control access with biometric single point of access. The battle on the townhouse side is that the collection procedure is far more difficult. Rob Wesselo, Managing Director of International Housing Solutions concludes, “Our society is getting used to renting, with the age demo- graphics shifting and tenants renting for longer, they don’t have to buy and it may not always be the right deci- sion. Rentals in affordable housing is low risk and city properties have 1% vacancies and arrears. The product is becoming more vanilla and we are excited to see where this part of the market takes us.” ■

is 4,75%; in the R3 000 to R7 000 market it drops to 4,31%; the R7 000 to R12 000 market the va- cancy rate is 5,55%; and rentals over R12 000 per month the vacancy rate is highest at 12%. Demand outstrips sup- ply in the Western Cape demand is severely con- strained, demand sits at 92% and supply only 37%. Tenant behaviour shows that most tenants are in

to 78,98%of tenants in the Free State. Dickens says that the worst payers are those rentals over R25 000 per month. She concludes that the best tenant behaviour is in the R3 000 to R7 000 market, with low escalations and low vacancies. But the R7 000 to R12 000 category is the one to watch in the future. Managing Director of Trafalgar group of Properties, Andrew Schafer says that arrears in some portfolios showed less than half a percent ar- rears because of shortage of accom- modation. Schafer says, “In older

good standing and paying rent is a priority. Rental escalations are heavi- est in the Western Cape at 12,13% compared to 3,23% in Gauteng and 3,59% in KwaZulu-Natal. Dickens says, “Rental payments are the first ones that tenantsmake in the Western Cape because there are somany peoplewaiting for affordable accommodation.” Payment profiles show that rental payment behaviour differs between provinces with the Western Cape showing that 78,22% pay on time; compared to 60,21% in the Free State.

October/November 2016