Both monthly mortgages and rental payments held tight to their number one position at the top of the pile of priority payments during 2021’s first quarter according to TPN Credit Bureau’s Residential Rental Monitor 2021 Q1.
However, not one category of consumer credit was spared in the hard lockdown as jobs were lost and income slashed. Most notably, short-term credit took the biggest brunt of delinquency, dropping to the lowest level on record to only 50.59% of accounts paid in ‘current’ terms but, recovering the following quarter to back over 70%.
“Credit facilities are a critical line of credit for consumers, given that two thirds of all credit agreements are granted for this category of credit – credit cards, store cards, and bank overdrafts become a lifeline when income and jobs are at risk” says Michelle. “Noticeably, consumers did reprioritise credit facilities to higher up the payment ranking with 74.19% of these agreements in ‘current’ payment terms”.
FNB card transactions highlight important insight into how consumer spending shifted year-on-year (y/y) over the pandemic. Obliged to work from home, consumer spending on hardware and furnishings increased to 124% from January 2020 to 2021. Not surprisingly, medical and pharma spend also increased to 118% y/y. General retail is also up 111% y/y/ with spend on groceries, automotive, and apparel remaining flat at 104% and 98% respectively. FNB card transactions also highlight industries which suffered the biggest loss of spending with tourism down to only 50% of y/y value, dining out and entertainment as well as fuels and tolls spend down to 82% and 84% from the previous year.
Rental relief and payment holidays
Job losses and income vulnerability was the catalyst that sparked industry wide rental relief and payment holiday customer support. In the period leading up to the pandemic, consumers in good standing were in decline, dropping to 57.1% in 2019. Payment holidays (rolled out in 2020 and which were recorded on the credit bureaus without adversely affecting consumer credit profiles) had the effect of improving the number of consumers in good standing to 62.6%. Payment holidays were only ever a short-term relief and consumer good standing has again started to slide, ending at 61.8% in 2021’s first quarter.
Rental relief provided by residential landlords reflected in the age of analysis of arrears, there is a visible turnaround of tenants more than three months in arrears. Similarly, to consumer credit, rental relief was a short-term solution to assist tenants who had lost some or all their income during a period where they were restricted from moving. As soon as the restriction of movement was lifted in May 2020, TPN data has indicated how tenant arrears shot up in value to new records. 13% of tenants in arrears are now more than six months behind on rent – all the while, still in occupation of the property.
Rent by value
Two in three tenants rent for less than R7 000 per month. Rental properties in the affordable range of R4 500 to R7 000 being the most popular with one in three tenants occupying this space.
In the low end of the market, rentals below R3 000 per month remain under pressure with 65.73% of tenants in good standing. A very significant 17.76% are unable to make any contributions to rental payments and occupy the ‘did not pay’ category.
The sweet spot, R7 000 to R12 000 rental per month, has grown to 23.3% market share and landlords will be happy with the 84.37% of tenants in good standing, a mere 4.86% who were unable to make any payment at all.
Performance by Province
Nationally, the Western Cape and Eastern Cape remain the top tenants, with 82.92% and 82.64% of tenants in good standing for the first quarter in 2021. Gauteng and KwaZulu-Natal are still struggling below the national average with 76.7% and 77.83% of tenants in good standing respectively.
Consumers are cautious as income remains under pressure. Although some jobs returned to the market in the last quarter of 2020 and the first quarter of 2021, the net effect of unemployment continues to be the highest on record. Nonetheless, the return to positive GDP growth to kick off 2021 provides a glimmer of hope that is desperately needed.