South Africa

Arrears rising across South Africa

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Hands holding an envelope with a red Past Due stamp on it

More tenants are behind on their rent, according to new data from the Q2 PayProp Rental Index, out soon. How can agents protect their clients from the increased risk of late payments?

The percentage of tenants in arrears rose from 18% in Q1 2023 to 18.4% in Q2, the highest level seen since the end of 2021. While that’s still well below the peak recorded during the pandemic, it marks two straight quarters of higher arrears.

The trend of increasing arrears can be seen across most of the country. Only the Northern Cape and the Free State saw the percentage of tenants in arrears fall in Q2. Most other provinces saw small increases, while in the North West this figure shot up from 22.8% to 25%.

Historically high interest rates and inflation are hampering tenants’ ability to pay, but it is encouraging that recently inflation has started coming down, dropping to 5.4% in June. The South African Reserve Bank also chose to hold interest rates steady last month, raising hopes that they may now stop climbing. However, the long-term effects of high interest rates on tenants’ finances may not yet have filtered through completely, so arrears could get worse before they get better.

What can rental agents do?

Decisive and swift action is key when recovering arrears. The longer a tenant stays in arrears, the less likely they are to ever pay what they owe. Agents can start by sending a payment reminder. With PayProp, these can be automated and sent by text message or e-mail.

If the tenant still doesn’t pay, it may be time to follow up with a Letter of Demand. PayProp offers an integrated Letter of Demand service together with our partners in the legal industry, allowing you to send legally compliant letters via your dashboard.

The Q2 2023 PayProp Rental Index will be sent to subscribers in the coming weeks. Make sure you’re on the list to receive the latest data on national and provincial rents, arrears, tenant credit metrics and more.

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