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Q1 2021 sees uptick in residential rental sector

According to the PayProp Rental Index for Q1 2021, the South African residential rental sector has shown early signs of recovery with an uptick in quarterly rental growth to 0.5%, measured year on year, following five consecutive quarters of steady decreases.
Image source: Gallo/Getty
Image source: Gallo/Getty

PayProp’s head of data analytics, Johette Smuts, says this number is still far below the rental growth rate of 3.2% seen in the corresponding quarter of 2020. “The increase in rent between the first quarter of 2020 and the same quarter in 2021 was just R33, to R7,819.”

Smuts says rental growth had been under pressure since 2018, long before Covid-19 reached South African shores, with slow economic growth putting pressure on tenants’ financials, and an uptick in residential developments adding to rental accommodation supply.

“Looking back at year-on-year growth rates from years gone by, it seems unlikely that we’ll see growth rates approaching 10%, like we did in 2013, anytime soon,” says Smuts.

Decrease in tenants in arrears

Another positive indicator in the Q1 index is the decreasing percentage of tenants in arrears after an initial spike.

In Q1 of 2020, 19.4% of all tenants were in arrears, and this quickly escalated to 24.9% in Q2 – an increase of close to 30%. Seen in context, this was when lockdown was first enforced, leading to many tenants losing their income or being forced to take a reduction in salary.

Then in June 2020, most industries reopened and tenants returned to work, leading to a steady improvement in the percentage of tenants in arrears each quarter since then. Encouragingly, only 20.3% of tenants were in arrears by Q1 2021.

“It’s clear to us that South Africans are still in recovery from the financial implications of the pandemic and the lockdown. Tenants that defaulted in 2020 are having to pay their full rent each month as well an additional sum towards their outstanding balance – no easy feat in the current economic climate,” says Smuts.

“However, while the average arrears amount relative to rent has improved to 93.2% from its peak of 104.6%, it is not surprising that this is still much higher than the 78.5% measured before lockdown.”

For the full PayProp Rental Index for Q3 2020, click here.

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