{"id":813697,"date":"2025-02-24T10:36:22","date_gmt":"2025-02-24T08:36:22","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=813697"},"modified":"2025-02-24T10:36:27","modified_gmt":"2025-02-24T08:36:27","slug":"big-trouble-ahead-for-landlords-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/property\/813697\/big-trouble-ahead-for-landlords-in-south-africa\/","title":{"rendered":"Big trouble ahead for landlords in South Africa"},"content":{"rendered":"\n

There are early warning signs that arrears could worsen this year, and tenant credit scores are under pressure with an increase in those classed as high risk.<\/p>\n\n\n\n

This was highlighted in the latest PayProp Rental Index for the fourth quarter of 2024. At the end of 2023, only 17.0% of tenants were in arrears\u2014the lowest ever recorded by PayProp. <\/p>\n\n\n\n

However, the report highlighted that, as rental growth slowed at the start of 2024, arrears surged to 18.3%, affecting nearly every province. <\/p>\n\n\n\n

The good news is that this trend reversed as the economy improved, and arrears dropped to 17.1% by the end of 2024, just above the previous year\u2019s record low.<\/p>\n\n\n\n

But despite the decline in the number of tenants in arrears, tenants who remain behind on payments are falling further into debt.\u00a0<\/strong><\/p>\n\n\n\n

The average arrears percentage, which indicates the proportion of rent owed by tenants in arrears, rose from a record low of 74.0% at the end of 2023 to 77.5% in Q1 2024.<\/p>\n\n\n\n

Although it decreased in Q2 and Q3, it climbed to 77.1% in Q4.\u00a0<\/p>\n\n\n\n

This indicates that while fewer tenants are behind on rent, those who are struggling are falling deeper into debt, raising concerns about worsening arrears in the coming year.<\/p>\n\n\n\n

The report explained that arrears generally peak in the first quarter and gradually recover throughout the year. <\/p>\n\n\n\n

However, the increase in Q4 could indicate deeper financial distress among tenants, which could be an early sign of worse to come this year.<\/p>\n\n\n\n

Looking at the provincial data, the Western Cape had the best tenant arrears performance in South Africa, with only 13.2% of tenants behind on rent, the lowest rate in the country. <\/p>\n\n\n\n

This is an improvement from 14.3% in Q4 2023. Additionally, tenants in arrears in the Western Cape owed just 60.9% of the average rent, the lowest debt burden nationwide. <\/p>\n\n\n\n

North West also showed significant improvement, with arrears dropping to 15.5% from 25.7% at the start of the year and the debt amount aligning with the national average at 77.1%. <\/p>\n\n\n\n

Limpopo performed well, too, with tenants in arrears owing 71.8% of the average rent, comfortably below the national average.<\/p>\n\n\n\n

The Free State had the worst tenant arrears situation, with 24.2% of tenants behind on rent, the highest in the country. These tenants also owed the most, at 90.4% of the average rent, up from 85.5% in Q4 2023. <\/p>\n\n\n\n

Mpumalanga also struggled, with 19.6% of tenants in arrears, the second highest rate, although the debt percentage fell slightly to 67.8%. <\/p>\n\n\n\n

KwaZulu-Natal followed closely, with 19.4% of tenants behind on rent, owing 71.7% of the average rent.<\/p>\n\n\n\n

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Payprop also noted that high interest rates and inflation continue to strain tenants’ finances. In Q4 2024, tenants spent 44.1% of their income on debt repayments, up from 43.6% a year earlier. <\/p>\n\n\n\n

Rent also took up more of their budget, rising to 28.7% of income from 28.3% in Q3 2023. The average tenant credit score remained at 647 in Q4 2024, consistent with the past two years. <\/p>\n\n\n\n

Although credit score providers like Experian consider this low risk, it falls short of the minimum risk bracket. <\/p>\n\n\n\n

PayProp\u2019s Tenant Assessment Report, which combines credit scoring with rental payment data, shows worsening tenant risk compared to a year ago.<\/p>\n\n\n\n

The report showed only 40.8% of tenants were classified as minimum risk in Q4 2024, down from 41.4% a year earlier. <\/p>\n\n\n\n

Additionally, 25.8% were categorised as high-risk, up from 24.8% in Q4 2023. High-risk tenants are more likely to fall behind on rent, posing challenges for landlords.<\/p>\n\n\n\n

After deteriorating at the start of 2024, tenant risk improved slightly in the second half of the year, with more tenants moving into lower-risk categories. <\/p>\n\n\n\n

PayProp said that if interest rates drop in 2025 as expected, this trend could continue, easing some pressure on tenants and landlords alike. <\/p>\n\n\n\n

However, PayProp stressed that the rise in arrears value in Q4 means landlords should remain cautious in the year ahead.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

PayProp’s latest Rental Index flagged an early warning sign for arrears while more renters are considered high-risk.<\/p>\n","protected":false},"author":92,"featured_media":813729,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12755],"tags":[20940,17020,21177,853,11731],"class_list":["post-813697","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-property","tag-landlords","tag-pay-prop","tag-rental-index","tag-south-africa","tag-tpn"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813697","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=813697"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813697\/revisions"}],"predecessor-version":[{"id":813839,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813697\/revisions\/813839"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/813729"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=813697"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=813697"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=813697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}