Good tenants are harder to find
Category From Our CEO
One of the most interesting findings of the latest PayProp Market Report is that finding quality tenants is rated by more than 50% of rental agents as being their biggest problem currently - as opposed to only 34% who rate managing arrears as being their toughest task.
These figures, extracted from PayProp's annual survey of rental agents, reflect the continued and growing pressure on tenants as well as other consumers due to persistently high inflation and interest rates over the past two years. With household budgets stretched tight and any reserves they had most likely spent, it is becoming increasingly difficult for consumers to meet their credit obligations - and for agents to find tenants whose credit records, employment status and affordability levels all line up.
This underlines how important it is for landlords not to "go it alone", but to work with a rental agent from a reputable company like Chas Everitt, which performs comprehensive checks on prospective tenants that go well beyond the standard credit report checks. We often discover falsified payslips and bank statements, for example, or find out that a relative or employer who is supposedly supporting an application is not exactly who they are claimed to be.
In fact our refusal rate - or recommendation to a landlord that a tenant should not be placed - has been more than 50% for most of the past year, as we hold firmly to the view that it is far better for our clients to spend time upfront identifying and placing quality tenants than it is to spend time later dealing with rentals arrears and eviction procedures.
It is a sobering thought that the average tenant is currently spending about 45% of their take-home pay on debt repayments and about 28% on rent, leaving only 27% for everything else, from food and transport to school fees and insurance. However, it appears that many have already recognised their financial vulnerability and have moved or are currently moving to more affordable rental homes.
In 2023, the PayProp figures show, more than 77% of tenants who were moving gave this as their reason for doing so, and this is also something for landlords bear in mind when they are contemplating a rental increase. If they have a quality tenant in place who pays the rent on time and treats their property well, it may be worth foregoing a rental increase in order to hold on to them.
Meanwhile, the good news for landlords and buy-to-let investors is that as high interest rates continue to limit opportunities for tenants to become homeowners, those who do have a rental home they like and can afford are seemingly very committed to paying their rent. The average national percentage of tenants who are in rental arrears has dropped from 18,5% at this time last year to 17% - aided perhaps by of the voluntary downscaling taking place.
In addition, the average amount of arrears is about 74% of a month's rent - a far cry from the post-Covid situation when many tenants were several months in arrears. The latest TPN Residential Vacancy Survey also reveals that rental vacancies are low across the country and falling. At the end of 2023, the national vacancy rate was 6,69%, down from 6,76% in the third quarter. And in 2023 as a whole, the national average vacancy rate was 6,73%, or 11.69% lower than in 2022.
KwaZulu-Natal is currently the province with the highest vacancy rate (10,5%) and the Western Cape the region with the lowest vacancy rate (3,18%). And when it comes to rental value, the lowest vacancy rates are currently being experienced in properties renting for more than R7000 a month.
Author: Berry Everitt