The COVID-19 pandemic has impacted many spheres of everyday life, but one of the biggest is the the rental market.
In March, just before South Africa went into full lockdown, just over 20% of the country’s tenants were in arrears. This increased by 4% just a month later.
“While we have already seen an increase in both the percentage of tenants in arrears and arrears as a percentage of rent in April, we expect May and June to be even worse. This position and the debt recovery process will be influenced by the pandemic, the lockdown levels and their duration,” said Johette Smuts, who is the head of data and analytics for PayProp SA.
According to Property24, rentals may drop by 10% over the next 12 months, and landlords are advised to be accommodating of tenants who experience financial strain as a result of the COVID-19 pandemic.
Ben Shaw, who is the CEO of residential property distributor HouseME, expects the price of rentals will become more appealing in the years to follow. Based on data by the distributor, an average rental rate for a bachelor in Cape Town will fetch R10 034, while in Gauteng, a similar bachelor may cost R6 494.
A two-bedroom apartment in Durban will fetch R12 878, while the same apartment will cost R12 350 per month in Cape Town. Currently, the most affordable property market is in the Gauteng province, as a two-bedroom apartment costs R8 750 there.
HouseME data also indicates that rental rate escalations have been trending lower for a number of years.
“Lockdown has forced rapid behavioural change towards technology, with many opting to complete processes online rather than face-to-face. Consequently, HouseME has seen a significant uptick in the adoption of its platform as landlords and tenants seek its tech-driven pricing tools, digital lease, and online payment system. We have seen a five-fold jump in units from portfolios that are considering moving over to a digital long-term letting platform like HouseME as compared to the first three months of the year,” Shaw said.
“Before lockdown, the more risk-averse landlords would take up our risk mitigation products. In the last few weeks, however, almost all landlords our sales department has spoken to have expressed interested in taking up our Rental Guarantee (which pays out rent on time even if the tenant pays late, as well as up to two months’ rent – on top of the deposit – in the event that the tenant can’t pay rent at all).”
“Many tenants are proving reluctant to attend physical viewings, and are basing their decisions increasingly on the visuals available to them on online property marketplaces. Professional photo’s and video walk-throughs are gaining popularity as property owners try to stand out from the increasingly fierce competition.”