The province in South Africa where tenants are a landlord’s worst nightmare
The number of South Africans unable to pay rent is rising, and the North-West has the most people in arrears with 1 in 4 tenants behind on their payments, creating a nightmare for landlords.
The latest PayProp Rental index for the first quarter of 2024 shows that the number of tenants who cannot afford their rent has increased in South Africa.
After declining in the second half of last year, the report noted that the percentage of tenants in arrears leapt to 18.3% from 17% in Q1 2024—undoing almost all of the progress made last year.
The average arrears percentage also grew from 74.0% in Q4 2023 to 77.5% in Q1 2024.
The average arrears percentage, which expresses the average amount in arrears as a percentage of the average rent overall—an average arrears percentage of 80%, therefore, means that on average, a tenant in arrears owes 80% of one month’s rent in a particular province.
Provincially, the share of tenants in arrears year-on-year grew in all but two provinces.
In the province of Limpopo, the percentage of tenants who are behind on their rent payments has decreased from 18.8% the previous year to 17.5%.
Similarly, in the Free State, the percentage decreased from 26.7% to 22.0%, causing the Free State to no longer hold the highest percentage of tenants in arrears.
Instead, this unfortunate title has shifted to the North West, where the share of tenants in arrears has risen from 22.8% in the first quarter of 2023 to 25.7%.
This means every one in four people who rent in the province is behind on their rent payments.
Additionally, there have been notable increases in Mpumalanga, from 18.1% to 19.3%, and in KwaZulu-Natal, from 20.4% to 21.4%.
These increases may be attributed to tenants overspending during the December holidays.
However, the rise in arrears is significantly larger than what was observed in Q1 2023.
This increase may also reflect the affordability pressures limiting rent increases and causing more tenants to struggle with timely payments.
A recent report of a Durban businessman who hadn’t paid rent for his R12 million Umhlanga apartment for two years, with the eviction proceedings still ongoing, highlighted the potential nightmare this environment could create for landlords.
The businessman, claiming poverty, was ordered to leave a luxury penthouse by September 24. However, he’s appealing the ruling after a two-year legal battle with the landlord, Dr Blaine Bloy, who has spent about R700,000 trying to evict him.
As pointed out by the TPN Credit Bureau, as interest rates soar, the dream of homeownership has become increasingly unattainable for many South Africans.
Higher mortgage costs deter potential buyers, pushing them to remain in rental properties longer.
Simultaneously, the escalating cost of living, driven by inflation and rising utility prices, has tightened household budgets, making it difficult for renters to save for a home deposit or afford higher rents.
Stagnant salaries exacerbate the situation, leaving many unable to keep pace with the increasing costs.
As a result, demand for rental properties has surged, while the supply remains constrained, leading to low vacancy rates.
Landlords benefit from a steady stream of tenants.
However, tough economic conditions driving these rates can strain tenants financially, increasing the risk of them falling behind on rent.
This can lead to potential defaults and challenges for both tenants and landlords in maintaining stable rental agreements.
This is especially true for the North West, as the province’s economic strain is evident in its high unemployment rate.
The latest Quarterly Labour Force Survey (QFLS), published by Statistics South Africa on Tuesday (20 February), shows that the official unemployment increased by 0.8% from 32.1% in the fourth quarter of 2023 to 32.9% in the first quarter of 2024.
Looking at the expanded definition of unemployment – which includes discouraged workseekers – the situation is far more dire for most provinces.
The extended unemployment rate in South Africa’s provinces ranges from 26% to 54%, with the Western Cape being the only province with a rate below 30% on the expanded definition.
However, the North West has more adults out of work and not looking than people who are employed, with an unemployment rate of 53.6%.
This is closely followed by the Eastern Cape, which sits dangerously at 49.1%.
Read: Good news for property owners in South Africa – except in three major cities
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