Real Estate Investor Magazine South Africa September 2014 | Page 42

MANAGING

RESIDENTIAL

Rental
Payments

Proceed with caution

C

onsidering the tensions that have characterised
SA’s economic year to date, residential rental
payment behaviour was relatively stable – and
even slightly positive for Q2 of 2014, according to
TPN’s latest Rental Payment Monitor.
Signs of weakening have, however, started appearing,
predictably in the upper value bracket – traditionally
the first segment of the rental market to experience
deterioration after an interest rate hike.
Nationally, 86% of tenants are in good standing and
investors can take heart from the fact that more tenants
have been paying on time and in full.
However, towards the lower end of the market,
tenants who rent below R3,000 face numerous
challenges, with a rise in living expenses contributing
directly to the payment behaviour of the category.
Investors may well experience worsening collections in
Q3 when municipalities implement the Eskom price
increase in July. In addition, the interest rate increase
warning bell has sounded and investors are cautioned
to perform thorough affordability assessments.
The results of TPN’s RentReports should be viewed
by investors as a reminder to proceed with extreme
caution. It is no secret that the global economy is
expected to underperform for some time, while
downward revisions of SA’s economic growth outlook
confirms the need for increased vigilance across all
markets.
TPN’s advice in this regard remains simple: reduce
risk by identifying areas with measurable yields, while
sticking to the process of screening potential tenants
more thoroughly than ever.

RESOURCES
TPN Rental Monitor
42

September 2014 SA Real Estate Investor

www.reimag.co.za