Robust Demand Persists for Rental Properties, but Caution Prevails

Despite prevailing financial stress among consumers, the demand for rental properties remains robust, as indicated by the Residential Rental Monitor report for the last quarter. The market has demonstrated unexpected resilience, with TPN’s findings revealing a deterioration in the number of tenants in good standing in the first quarter across all provinces. According to Waldo Marcus, an industry principal at TPN Credit Bureau, tenants in the Western Cape exhibit a greater commitment to paying rent. At the same time, KwaZulu-Natal has the highest number of squatting tenants, and Gauteng follows closely behind.

The report attributes the healthy demand for rental properties to the South African Reserve Bank’s interest rate hikes, dissuading potential buyers from entering the property market. Marcus emphasises that while the rental market thrives, property investors should closely monitor consumers’ financial health and ability to fulfil rent obligations. The report highlights that property vacancies in the first quarter were 6.19%. TPN’s Market Strength Index, measuring demand and supply perception, stood firm at 9.14 points above equilibrium.

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According to Marcus, traditional market factors indicate a buoyant market with improved returns and lower vacancies. He anticipates that an expected interest rate hike before year-end will further discourage property purchases, maintaining a healthy demand. However, economic challenges have led to a slight decline in tenants in good standing for three consecutive quarters, with an increase in the number of tenants falling into the non-payment category in the last two quarters.

Marcus stresses that tenants classified as squatting risk landlords’ ability to collect rental dues, urging proactive measures and legal tools to recover outstanding fees. He underscores the importance of landlords implementing effective tenant risk monitoring to mitigate the risk of increased defaulting tenants. While a lower vacancy rate and higher escalations are positive indicators, Marcus stresses that successful property investment ultimately relies on tenants’ ability to pay rent, making proper background checks and vetting crucial. The right tenant in the right rental bracket is deemed as valuable as gold.

Source: Demand for rental property still strong, but remain cautious

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Picture: Supplied by Boksburg Advertiser

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