Money saved on rent during lockdown will be ‘sucked up’ by the coming electricity hikes

While tenants benefitted from cheaper rentals in South Africa during the lockdown, these gains will likely be wiped out by steep electricity price increases.

An analysis published by credit bureau TPN on Thursday (18 February) shows that residential rentals were -0.75% cheaper on average for the last quarter of 2020.

“However, tenants have little to celebrate given the Gauteng High Court’s recent ruling that Eskom be allowed to recover another R10 billion from customers in the 2021/22 year which effectively means an average tariff percentage increase of 15.63%.

“As a result, any savings in rentals will be sucked into the electricity tariff increase,” it said.

On Monday, the High Court ruled that Eskom can recover R10 billion from consumers, enabling the state power utility to raise electricity tariffs by 16%.

The ruling comes after Eskom and the National Energy Regulator of South Africa reached an agreement on the matter, the regulator said.

The court order allows Eskom to recover costs incurred for the production of electricity, with these tariff increases to be implemented from 1 April.

Tenants struggling 

A TPN survey conducted at the beginning of 2021 found that 53% of tenants rent because they cannot afford to buy.

This figure was 46% in the same period in 2020. A further five percent of tenants say they are renting because it is cheaper than owning property.

“Tenants are feeling financially vulnerable and 75% of tenants surveyed reported a loss of income during the lockdown,” said Michelle Dickens, chief executive of TPN Credit Bureau.

“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.”

At the same time, Dickens said that vacancy rates are trending upwards to 12.9% as tenants retreat to family and friends to recover financially.

“Although debt became cheaper as the prime interest rate plummeted to 7%, with millions of jobs lost and the reality of temporary or permanent loss of income for millions, consumers are poorer overall,” she said.

She added that property sales registered at the deed’s office were down 20% for 2020.

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, she said.

Read: Rising energy prices could lead to rate hikes in South Africa