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Friday Nov 23, 2012

Residential property tenants improve in paying their bills on time

Residential property tenant payment behaviour bucked deteriorating consumer credit trends and a potential unsecured credit bubble to surprisingly improve in the third quarter, according to TPN credit bureau.

A residential property in Johannesburg.

TPN said yesterday that the national average rental price was again achieving double-digit escalations but expressed concern that tenants were using credit to pay for monthly living expenses, which it warned was unsustainable.

This concern was based on the 36 percent year-on-year rise in unsecured lending and 43 percent year-on-year growth in credit facilities while the 0.5 percentage point reduction in the prime interest rate in the same period would have offered only a small amount of relief.

TPN said the rental payment performance of tenants improved overall in the third quarter across rental value brackets and regionally.

Its latest rental payment monitor said tenants in good standing improved by 2 percentage points to 83 percent after remaining flat in the previous three consecutive quarters.

Tenants in good standing is based on the percentage of tenants who "paid on time" and in the "paid late" category.

TPN said the provincial "did not pay" figures indicated that tenants in Gauteng and KwaZuluNatal were twice as likely to skip a month's rent.

The report said 5 percent of tenants in Mpumalanga and Limpopo and 6 percent in the Eastern Cape and Western Cape "did not pay". This rose to 11 percent in Gauteng and 12 percent in KwaZulu-Natal.

One of the reasons TPN had identified as a possible explanation for these provincial payment trends was suggested by looking at overall credit granted to the population in each province, it said.

However, rental payment behaviour by value and province improved across all sub-categories. Tenants at the lower end of the market with rentals below R3 000 a month remained the most unreliable, followed by the top end with rentals at more than R12 000 a month.

The middle categories with rentals of between R3 000 and R7 000 and R7 000 and R12 000 fared best.

Above average rental collections were recorded in the Eastern Cape (89 percent) and Western Cape (87 percent) while average rental collections in Mpumalanga (89 percent) and Limpopo (85 percent) also reflected quality tenants.

Gauteng (80 percent) and Kwazulu-Natal (81 percent) performed below average.

TPN said the national average rental price escalated by 10.36 percent year on year, adding the average rental nationally was R5 102 a month.

Mpumalanga has the highest average rentals at R5 590 a month, followed by the Western Cape (R5 343 a month), Gauteng (R5 226 a month), Limpopo (R5 003 a month), Kwazulu-Natal (R4 829 a month) and Eastern Cape (R4 328 a month).

From a provincial perspective, Gauteng (37.1 percent) and the Western Cape (28.9 percent) had the highest proportion of rented tenure. Only 14.9 percent of households in the Eastern Cape and 12.6 percent of households in Limpopo lived in rented accommodation, it said.

Business Report

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