Remarkable payment behaviour

Viewed against the backdrop of deteriorating consumer credit and a potential unsecured credit bubble, with house values declining in real terms and slower than expected GDP growth, it is surprising to note that residential tenants’ payment behaviour firmed during Q3 2012. Tenants in good standing improved to 83% – an improvement of 2% from Q2, which had remained flat along with the previous 3 consecutive quarters. “Tenants in good standing” is based on tenants in the Paid on Time category (71%) and the Paid Late (12%) category. One would have to go back to late 2007 and early 2008 to see rental payment performance at such good levels.

Further analysis of rental payment behaviour by value and province showed improvement across all sub-categories, as well as confirming the rating order has remained intact.Tenants at the lower end of the market (Rent below R3000 pm) remain the most unreliable, followed by the top end (Rent above R12000 pm) with the middle categories faring best (R3000 – R7000 and R7000 – R12000)

Overall, Q3 2012 saw tenants improve their rental payment performance in all categories: across rental value brackets and regionally. The 50 basis point drop in prime interest may have offered a small amount relief, but the increase in unsecured lending of 36.12% y-o-y and credit facilitates of 43.14% y-o-y raises the concern that tenants are using credit to pay for monthly living expenses, which of course is unsustainable.

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