The state of South Africa’s economy, coupled with an onslaught of permanent or temporary loss of income means many South Africans are facing some significant financial pressures – impacting the rental market both from a rental price as well as vacancy perspective.
“Tenants are feeling financially vulnerable,” reports Michelle Dickens, CEO of TPN Credit
Bureau, adding that 75% of tenants surveyed reported a loss of income during the lockdown.
A recent TPN Tenant Survey conducted at the beginning of 2021 found that nearly one in
ten tenants confirmed a permanent loss of income, while 12% of tenants received no
income for a limited period but are now back to earning their full salary, and 50% of
tenants received only partial pay for a temporary period.
Only 25% of tenants confirmed their income was unaffected during lockdown.
Vacancy rates are trending upwards to 12.9%
At the same time, reveals Dickens, the TPN Vacancy Survey shows that vacancy rates are
trending upwards to 12.9% as tenants retreat to family and friends to recover financially.
In a blow to residential housing landlords but providing some respite for tenants,
negative rental escalation has arrived. According to the specialised credit bureau’s research,
residential rentals were -0.75% cheaper on average for the last quarter of 2020.
Yet says Coetzee, first-time buyers can afford 30% more now than you could in January last year.
“The average monthly rental on a R1 million property is about R7 800.
At a prime lending rate of 7%, the monthly bond repayment on the same property would be comparatively less at R7 753.”
Of course, there are additional costs associated with owning a house, but there is also the
benefit of having a fixed asset instead of paying off someone else’s bond each month.”
Given the close correlation between the housing market, consumer spending and the
state of the economy, the state of the property market is indicative of the current malaise
in the economy – with those keeping a close watch now anticipating the outcome of
Finance Minister Tito Mboweni’s 2021 Budget Speech.
Job losses balanced against robust job creation, and how the economy evolves in response to the pandemic,
will be a key indicator for the property market both in the residential sales and rentals sector in 2021 going forward.