Data from the upcoming PayProp Rental Index for Q4 2023 shows tenant arrears at their lowest level since we started tracking them in 2020.
Just 17% of tenants were behind on their rent during the quarter, down from 17.5% in Q3. This is despite well-publicised increases in the cost of living and servicing debt that have affected South Africa and the world.
The average tenant in arrears owed 74% of their monthly rent, the same as the previous quarter and still the lowest recorded in the Rental Index.
What is driving this?
Tenant income up
The improvement in key arrears stats isn’t just because tenants have tightened their belts. The Rental Index found a 7.5% rise in average income in Q4 2023 compared to a year earlier.
That has led to an improvement in spending patterns – spending on both rent and debt repayments declined as a proportion of income despite the strong rental growth measured in 2023 and continued high interest rates. As a result, tenants were left with 26.8% of their income to do with as they wish, up from 23.1% a year earlier.
However, it’s not clear how much of that is due to a rise in incomes across the board, and how much is down to tenants with higher incomes staying in the rental market for longer instead of buying homes at a time of high prevailing interest rates.
No official data is out yet for income growth in 2023, although earlier in the year, PwC South Africa projected 5.2% annual growth in salaries and wages. This would have been a stronger performance than in 2022, but as it turned out, it was modest compared to the 7.5% reported in the Rental Index.
Not all positive at provincial level
While the national trends were positive, some provinces saw deteriorations in tenant finances. In Mpumalanga, the share of tenants in arrears rose from 17.5% in Q3 2023 to 18% in Q4. Meanwhile, in the Northern Cape, this figure also rose from 17% in Q3 to 17.5% in Q4 – although this is still much better than it was a year earlier.
However, a couple of provinces where tenant finances have traditionally been more volatile – the North West and the Free State – saw the share of tenants in arrears drop significantly in Q4.
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