"There are a number of reasons contributing to the stabilisation of the rental market," says Michelle Dickens, Managing Director of TPN, Credit Bureau, South Africa's only specialist property credit bureau and developer of the industry's first rental payment profile of its kind. "The low prime interest rate and limited leading in the credit market have created flat or low rental increases over the last 2 years."

"If we look back, a major contributor was the over-supply of investment properties where desperate investors felt pressured to lower their rental prices. Landlords also recognised the advantage of extending leases with quality tenants and kept their rental price the same to ensure continued collection.

"Another factor that influenced lower increase in rentals for 2010 was the fact that substantially higher electricity costs were borne by the tenant.
Many landlords, as provided by most lease agreements, also enforced the collection of increased rates and taxes onto the tenant. The majority of this information is reflected in our quarterly Rental Payment Monitor."

Should the current rental landscape change and it will, landlords and property managers will have to be aware of the following:

Rising interest rates: The interest rate cycles affect most landlords, when the interest rate goes up - so does the monthly repayment. This will not affect landlords who have a bond free investment or are on a fixed rate.
Most commentators on the interest rate predict a flat trend for 2011 with the possibility of increasing interest rates towards the end of 2011 or beginning of 2012.

Budgeting rental payments in 2011: Tenants have enjoyed flat to relatively low rental increases over the last 3 years. This was due to an oversupply of stock, and gave no leverage for negotiations.  This year sees the supply and demand dynamics shifting. According to FNB's John Loos, buy-to-let investors have declined from 25 % of properties transferred in 2007 to just 8% currently. There are more tenants than stock, especially in the low to mid-priced properties allowing property managers and landlords to be more choosey when placing a tenant at their preferred price.  Ideally landlords could count on a rental price of 1% of market value, but this takes time to achieve. Currently this figure is at 0.5% to 0.8% and the higher the market value the lower the percentage to rent.

Things to consider when placing a new tenant: It is very important to place the right tenant. Property managers and landlords should consider tenant's TPN and credit profiles and their affordability for the property. Ultimately the landlord has the most to lose if a delinquent tenant is placed. A property that is in good condition attracts a better quality tenant. Also, make sure property is well maintained throughout the lease term so the tenant cannot use any "defects" as an excuse to withhold rent.

Avoid sticky situations: Keep everything in writing. By making sure all your documentation is up-to-date and complete you will be able to provide services and support to all parties involved. Part of this is to make sure that you keep abreast of all legislation and case studies - there are a number of institutions providing on-going training and support. Also make sure that all expenses are up-to-date. There are cases of landlords not paying their levy / municipality accounts - tenants receive the landlord's notices of non-payment at the property and threats of utility disconnection, the tenant could also use this as a reason not to pay rent.