Bad news for landlords in South Africa
The latest TPN Residential Rental Monitor highlighted an increase in tenants falling behind on rent, a worrying trend for landlords in South Africa.
Thabo Hollo, Senior Programme Manager at Old Mutual Financial Education, said the data reflects just how stretched household budgets have become.
Speaking about the rise in tenants missing their rent payments, Hollo noted that the rental market is under pressure, with the percentage of tenants making no rent payment rising from 6% in Q2 to 6.15% in Q3.
He added that this is happening at a time when household budgets are tightening, leaving many tenants with very little room to manoeuvre.
Asked why more people are struggling to meet their monthly rental obligations, Hollo pointed directly to broader economic conditions.
As costs rise, Hollo explained that tenants are scrutinising their budgets and looking for expenses they can put off.
“Tenants tend to look at lines in their expenses that they can run to, and rental, unfortunately, is one of those,” he said.
Insurance is another major cost that people are increasingly skipping, and overall, it’s just a matter of pressure on people’s pockets, which is pushing them to miss key expenses.
This is counterintuitive to many, given that rent is typically considered one of the most important expenses in any household budget.
“But unfortunately, as things stand at the moment, it is one of those that people tend to skip,” he said.
He pointed to the familiar 50-30-20 budgeting rule, where essential expenses—including rent, bond repayments, and rates—should take up half of a household’s income.
However, he noted that South Africa is seeing a creeping increase in expenses, such that people, even in the 50%, start missing key payments.
These can include car payments or rent, and because of the tightness of the budgets, people would go into default on the payments.
The importance of scaling down
Despite the overall trend, some provinces continue to fare better than others.
The Western Cape, for instance, still has the highest percentage of tenants in good standing, despite a slight increase in non-payment—from 5.28% to 5.51%.
However, Hollo warned that this reflects deeper economic dynamics at play. “That also mirrors the economic performance of provinces,” he explained.
“Provinces that tend to perform slightly better economically, such as the Western Cape, fare much better than the other provinces.”
He stressed that national pressures are affecting everyone. “People are under massive pressure; we have to find ways to live within our means.”
One of the most concerning trends is the increasing reliance of South Africans on credit. Instalments consume roughly 28% of the net income of credit-active consumers.
Data shows that credit is increasingly being used for daily necessities. “We’re starting to see people using credit for expenses that should not be covered through daily living expenses, your groceries,” he said.
These are costs that ideally should never be financed through debt, but because there’s so much pressure on the pocket, people are turning to credit to maintain lifestyles they can no longer afford.
For households under strain, Hollo stressed the importance of scaling down. Whether it’s due to reduced income, a job loss, or a salary cut, adjusting spending quickly is essential.
“There is nothing wrong, there’s no shame in scaling down,” he said. Cutting expenses, finding cheaper alternatives, and being realistic about what you can afford are crucial steps.
“It might be tough to adjust to a new lifestyle, but it will be even worse if you don’t cut down.” Even when income hasn’t fallen but is simply failing to keep up with inflation, he said, households should still manage expenses carefully.
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