This figure is made up from 3 of the categories into which TPN indexes rental payment profiles: Tenants who paid on time, as well as those who paid during the "grace period" (the first 7 days of the month) and those tenants who paid late. In addition, there are categories for tenants who made a partial payment and for those who did not pay their rent at all. There was however a slight shift in the underlying good standing categories: rent paid on time deteriorated by two per cent to 71%, as a result of more tenants paying late - 5% making grace payments - and 10% paying later - both increasing by one percentage point. In contrast 9% of tenants made a partial payment – a figure that has remained unchanged for 15 months, while 5% of tenants were recorded in the did not pay category. Nonetheless the overall picture still constitutes good news for the industry, as the 86% good standing ratio achieved over the past 3 quarters of 2014 remains the highest on record.

Q4 of 2014 reflects data six months post the credit amnesty, which legislated the removal of all default information and paid up judgements from all credit bureaus. For TPN this translated to the deletion of R300m worth of rental default information. Due to the 12 month retention period for behavioural defaults or 24 months for enforcement action, this means default information is limited to a 12 or 24 month lifespan. Not surprisingly, rental default records listed from 1 June 2014 onward now tops R200m - at an average of R17,653 per listing. The upfront legal cost of pursuing these arrear rental defaults - with no guarantee of successful collection - has prevented most landlords from taking further action and consequently hundreds of millions of rands in rental defaults have been written off.

This prompted the introduction of the TPN Collection Platform powered by Solinc in 2014 Q4, which recorded R17m worth of default rent in its first 3 months, at an average of R18,000 per claim. More importantly, during the same period the Collection Platform concluded R400,000 in monthly settlement arrangements. TPN has categorised rent into 5 distinct price brackets: Tenants who pay less than R3,000 basic rent per month, the R3,000 to R7,000 bracket, the R7,000 to R12,000 bracket, the R12,000 to R25,000 bracket and tenants who pay more than R25,000 per month. A number of key points are noticeable in these value brackets. Most importantly 83% of tenants rent for below R7,000. 

This is a year-on-year decline from 86%. There has also been a shift from the lower end of the market into the affordable segment and through to the middle segment where 13% of tenants rent between R7,000 to R12,000 - up from 11% the previous year. This movement through the rental price brackets is attributed mainly to rental escalations, currently at 6.49%, coming off a peak of 8.6% in Q4 2013. Notably the Northern Cape and Free State are recording double digit escalation 15.42% and 13.14% respectively. Limpopo, although still commanding top spot in terms of average rental prices, only achieved an average escalation of 0.82% in quarter 4, possibly indicating a cooling off from double-digit growth for the previous 5 quarters. 

In more “stable” provinces, where fracking, mining or construction of the Medupi power station are not driving prices higher, as in smaller regions with limited supply, the rental escalations are muted, such as Western Cape (3.43%), Gauteng (5.65%) Kwazulu Natal (2.44%). Eastern Cape (9.57%) is an interesting example where East London has limited rental stock driving escalations, compared with lower increases in Port Elizabeth. The national average rental price is currently R5,620. Interestingly, Northern Cape, Limpopo and Mpumalanga lead the pack with average rental prices of R6,306, R6,087 and R6,042 - caused by limited rental stock and over-supply of 'out of town tenants' attracted by fracking, mining and construction of Medupi. 

On the other hand, the Western Cape, Gauteng, Kwazulu Natal and North West achieve an average rent of R5,952, R5,930, R5,516 and R5,052 - compared with the more subdued prices of Eastern Cape and the Free State at R4,818 and R4,877 respectfully. TPN notes the "sweet-spot" for residential rentals remains the R3,000 to R7,000 rental category, with 61% of tenants renting in this price range, resulting in consistently strong demand for properties. Importantly the rental payment profile is also a healthy 88% of tenants in good standing - and the least number of tenants in the 'did not pay' category, at only 4%. In addition the R7,000 to R12,000 value category is also a growing bracket with 13% of tenants in this price range – up from 11% y-o-y. Significantly 89% of these tenants are in good standing with an impressive 76% paid on time and only 4% in the did not pay category.

 Entry level rentals, those below R3,000 (80% in good standing) and the upper end of the market, those above R25,000 (81% in good standing) continue to fare worst but for different reasons. The entry level bracket records the highest percentage of tenants who simply do not pay, at 9% (nearly 1 in ten tenants) while the upper end of the market struggles most with late payments (16%). Western Cape continues to outperform the overall market with 89% of its tenants in good standing. What makes this figure even more impressive is that 79% are tenants who paid on time - placed in perspective against Gauteng which only achieving 68% paid on time. Viewed individually in the corresponding table, provincial good standing ranges between Free State’s 78% to Western Cape’s 89%, while closer interrogation of the data highlights the differences in grace and late payment performance: Notably 18% of Gauteng tenants will pay after due date compared to Western Cape's 10%.

Previously TPN has pointed out the cash flow requirement of landlords needing to fund the property expenses while waiting for rental income. In addition to this, there is also the time and cost associated with demanding payment, and opportunities lost that may have led to more productive income producing activities. Latest data released by the National Credit Regulator for Q3 2014 indicates that 55.3% of consumers are in good standing. Conversely, 44.7% of consumers have impaired credit profiles. This number is important when landlords are screening tenant applications and finding it difficult to select quality applications as nearly 1 in 2 consumers have impaired profiles.

The relevant graph highlights certain valuable insights: Consumers pay their mortgage bond first; (91.46% in current) or their rent (85.89%). – In other words the roof over their head is the first priority... (cell phones and DSTV aside). By comparison, the payment hierarchy of consumers tends towards paying short term credit (76.22%) followed by credit facilities (71.37%) then secured credit (66.94%) and lastly unsecured credit (61.30%). The following graph emphatically demonstrates consumers’ account payment priorities. And TPN’s Rental Payment Profile is paramount to selecting a quality tenant – for even though 45% of consumers have impaired credit profiles this does not translate into rental payment impairment.

However , the tenant selection process just got easier, TPN released the ultimate RentCheck in Q4 2014. Now the most comprehensive credit check in the market for tenant application, comprising rental payment profile, total credit exposure, full affordability summary, complete judgement and default listings from 3 credit bureaus neatly wrapped up in a powerful scorecard powered by RentMaster – South Africa’s only rental guarantee product.