Tenant risk divide threatens record-low rent arrears

South African tenants are honouring their rent obligations better than ever before, but this stability may be hiding a growing divide in tenant finances.

According to the most recent PayProp Rental Index, the national percentage of tenants in arrears fell to an all-time low of 16.9% in the second quarter of 2025. At the same time, however, rental applicants are taking on more debt, spending 52.1% of their income on credit payments, up from 46.7% a year earlier. As a result, their disposable income has dropped to just 18%, down from 23% last year.

The back story is that tenants are facing continued high living costs. On paper, debt repayments are getting cheaper: the prime rate finished Q2 2025 at 10.75%, a percentage point below where it was in Q2 2024. However, this is still significantly higher than the 7% interest rates seen during the pandemic.  

Inflation is also outpacing economic growth: projections for this year put inflation at 3.5% and GDP growth at less than 1%. Stats SA’s Quarterly Employment Statistics for Q2 found that wage growth was above inflation at 6.5%, but that there are also fewer people in work than a year ago.

Beneath that headline inflation figure, there have also been larger increases in the costs of essentials like food, utilities and transport, making it harder for people on modest incomes to reduce their spending. A recent report from the Competition Commission showed that electricity costs have gone up by more than double the rate of inflation since 2020.

“This quarter’s data shows a mixed picture,” says Michelle Dickens from PayProp. “It’s encouraging that fewer tenants are behind on rent, but the rise in household debt tells us this balance may be fragile. Many tenants are keeping up with payments, but with less financial breathing room than before.”

The risk divide

However, the Index also highlights that the increase in debt repayments is not affecting all tenants equally, meaning agents can still keep arrears under control by diligently reviewing rental applications. Among minimum- and low-risk applicants (as identified by the PayProp Tenant Assessment Report, which combines credit scoring and affordability analysis with tenants’ rental payment histories), the proportion of income that the least risky tenants spend on debt has actually fallen to 36%, and their disposable income has grown to 35.3%, up from 33.5% a year ago.

“This tells us risk isn’t increasing on the whole, but rather diverging,” says Dickens. “We’re seeing a clear split between tenants with secure finances and those under growing pressure. For property professionals, that makes careful screening and data-led decision-making more important than ever.”

Meanwhile, tenants are choosing more affordable properties, bringing down average rent-to-income ratios despite a sustained run of above-inflation rental growth. Tenants spent an average of 29.9% of their income on rent in Q2, down from 30.3% a year earlier. The PayProp report suggests that landlords and agents who stay alert to debt-related affordability pressures can still achieve sustainable rental growth.