Latest news with #PayPropRentalIndex
IOL News
29-07-2025
- Business
- IOL News
One bad tenant can cost you thousands — here's how to avoid that risk
A single bad tenant can cost thousands in unpaid rent, legal fees, and property damage. That's why thorough credit checks are more crucial than ever before. Image: Freepik Landlords who fail to properly vet potential tenants risk handing over valuable assets to people who may default or damage property — and relying on a prospective tenant's word alone is increasingly risky. 'Spending a small amount upfront on these checks can help avoid costly mistakes down the line,' said Michael-Anne Abrahams, bond originator and property finance consultant at MyProperty. She noted that due diligence — such as reviewing credit reports, financial documentation and references — was crucial. With rental prices increasing rapidly, landlords faced an added challenge in ensuring that tenants could both afford the property and be trusted not to damage it. 'Renting out a property is a financial commitment, and just like banks assess borrowers before issuing loans, landlords need to assess tenants before handing over the keys,' said Abrahams. MyProperty said rental fraud remained a concern, particularly in larger cities where demand was high. Credit bureau checks helped verify key details such as identity numbers, contact information, employment history and previous addresses. With rents climbing sharply in 2025, landlords could no longer afford to make leasing decisions based solely on gut feel or references, MyProperty Homeloans pointed out. The PayProp Rental Index showed that average rentals in the first quarter reached R9 132, marking a 5.6% year-on-year increase. Despite this growth, 17% of tenants were still in arrears — although that figure was down on the prior quarter. PayProp reported that 'average rents rose by 5.2%, 6.0% and 5.5% year on year in January, February and March respectively. February's growth is a new post pandemic record, and the highest recorded since August 2017," the index said. The report also highlighted a 2.8% gap between rental growth and inflation in February and March, the widest in the current rental growth cycle. 'A single bad tenant can cost thousands in unpaid rent, legal fees and property damage. That's why thorough credit checks are more crucial than ever before,' said Abrahams. Abrahams explained that using a credit bureau was just one of several tools available. 'It's not just about historic debt or repayments. A credit report can show a landlord how a potential tenant is currently handling repayment as well,' she said. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ 'In some cases, we've seen applicants falsify references or employment. A credit check gives you an independent way to confirm who you're dealing with. That's peace of mind, especially for private landlords who may not have access to other verification tools," said Abrahams. Credit bureaus drew information from a national database of credit accounts — including store cards, phone contracts, and loans — updated monthly by registered credit providers. This provided a consistent basis for assessing South Africa's more than 24 million active credit users. 'Even if a tenant has no rental history, a credit bureau report will still tell you how they manage debt, whether they're up to date with payments, and if there's any cause for concern,' said Abrahams. Landlords and rental agents also frequently used platforms like Tenant Profile Network (TPN), which provided tenant rental histories. However, Abrahams pointed out that TPN data only existed if the tenant had previously rented through an agency or a landlord who reported to the system. 'Otherwise it will not return any data because the system has no record of the tenant,' she said. She recommended using both credit bureau and TPN data — with the tenant's consent — to form a comprehensive view of the applicant's financial reliability. 'If the potential tenant has no profile at all, the landlord will need to rely on other available tools and conduct a thorough financial assessment,' said Abrahams. That included carefully reviewing three to six months of bank statements, verifying declared income and expenses, confirming employment and salary directly with the employer, and ideally speaking with previous landlords to conduct reference checks. 'These steps help create a fuller picture in the absence of formal credit data,' she said. IOL Business
IOL News
15-07-2025
- Business
- IOL News
Exploring the rise of rental properties and business conversions in South Africa's booming rental market
The apartment market is booming in South Africa. Image: Pexels South Africa's residential rental market boom brought a rise in properties being rented, let or changed into businesses, such as Airbnb listings or B&Bs. The national rental growth reached 5.6% in the first quarter of 2025 - the strongest quarterly increase in nearly eight years-according to the PayProp Rental Index. But what many landlords, tenants, B&B owners or Airbnb hosts do not realise is how the level of furnishing in a property can significantly influence insurance needs, says Ryno de Kock, head of distribution at PSG Insure. He said unfurnished rentals typically exclude movable items like furniture and appliances, leaving tenants to bring in their own. 'For landlords, this means securing building insurance that covers structural risks like plumbing blowouts, fire damage or storm-related incidents. A public liability extension is also essential to protect against third-party claims, like if a tenant or visitor gets injured due to negligence on the premises, De Koch said. Property owners' liability is also essential to protect against third-party claims, he said. "If the tenant or visitor's property gets damaged due to an event which is related to the building, for example-if a landlord does not maintain the property appropriately, and a roof tile is blown off by the wind and damages a vehicle, the property owner must have the necessary liability cover in place to cater for these damages,' De Kock added For tenants, the head said a major misconception is that the landlord's policy will cover their possessions. 'It won't. This means renters need their own contents insurance to protect items like electronics and kitchen appliances. For example, if a geyser bursts and damages your TV, you can only claim if you're properly insured. The landlord's policy will likely only cover structural damage.' Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading The insurance company said semi-furnished homes may include essentials such as a fridge, washing machine, or a dining room set. In these cases, it said landlords either take out contents insurance in addition to the standard building cover or include the contents as part of the rental agreement. It added that a comprehensive inventory list is crucial for these items, and each item should be documented with its replacement value. The company said most property owners will include these items as part of the rental agreement, where each item should be documented with its replacement value. 'This will normally shift the responsibility of insuring these items onto the tenant, who can be held liable for these items when the rental agreement ends.' Meanwhile, tenants were said to remain responsible for covering their own belongings. So, if they bring in a high-end speaker system or personal electronics, they must be sure to specify them in their policy and consider adding these items to 'all-risk' cover if the property is left with them. With regards to fully furnished properties, whether rented long-term or listed on Airbnb, these carry the greatest exposure for landlords. Here, De Kock advised that a comprehensive content policy is non-negotiable. 'From bed linen to TVs, everything should be insured at current replacement value. If you're hosting on Airbnb, make sure your policy covers multiple addresses if you have multiple risks. This will include your home and the rental property, if applicable,' he said. He added that it is also important to keep an updated inventory of all contents that are included in the insurance policy, with the replacement value per item. PSG Insure said short-term lets also introduce a higher chance of theft and accidental damage. As such, he said Airbnb hosts often face exclusions for theft without forced entry or damage caused by guests. Additionally, according to standard Airbnb insurance rules, cover may only apply if one resides permanently on the property and limits guest numbers to under six adults. The head said even when the property is fully furnished, tenants should still cover any valuables they bring in. He said a tenant's computer, camera, or designer coffee machine will not be included in the landlord's policy and may require separate listing under contents or all-risk cover. De Koch said it is also important to understand that a standard domestic insurance policy typically will not cover liability arising from paying guests. He said if one is listing their property on Airbnb or operating a guesthouse, they will need commercial liability insurance specifically designed to cover short-term or hospitality-related stays. He also suggested that this becomes especially critical when hosting international guests, who may claim damages in foreign currency. 'If you're renting out the property as an Airbnb, it's crucial that the property owner provides the necessary disclaimer to guests that the B&B or Airbnb cannot take responsibility for their items, and the guest should take extra precautions when leaving them unattended.' If meals are provided as part of a guest's stay, product liability cover is essential to protect the owner against risks such as food poisoning. Furthermore, liability insurance can extend to cover the actions of staff or employees, for example, if a waiter trips on a rug and spills hot coffee on a guest, the owner could be held legally liable. These scenarios may seem rare, but without the appropriate cover, they could result in financially devastating legal and medical claims. De Kock concluded: 'With the right policies and expert advice, property rentals – furnished or not – can be an extremely lucrative venture in today's market. The key, however, is understanding the specific risks you face and tailoring your cover accordingly. "An experienced adviser can help you navigate exclusions, avoid underinsurance, and ensure that your policy truly fits your property setup. According to the Landlords Association of South Africa (LASA), a commercial lease is a legally binding contract between a landlord and a tenant for the rental of property used for business purposes. Unlike residential leases, LASA said commercial leases are often highly negotiable and tailored to the specific needs of both parties. 'For landlords and tenants alike, carefully structuring the agreement is essential to protect financial interests, minimise legal risk, and provide clarity throughout the entire lease term.' LASA said that when structuring a commercial lease agreement to protect one's interests, they must consider addressing key elements in detail. 'A well-crafted lease reduces misunderstandings, clearly outlines rights and obligations, and provides legal remedies in the event of any problems that may arise.'
The Citizen
06-07-2025
- Business
- The Citizen
Why now is the most profitable time to become a landlord
Why now is the most profitable time to become a landlord Have you ever wanted to dip your toes into the world of real estate investments? Real estate experts say that now is the perfect time to do so. 'As South Africa's property landscape enters a new phase of growth and resilience, the rental and property sales markets are aligning to create a golden opportunity for those considering becoming landlords. With robust rental performance, moderating inflation, and consistent housing price appreciation, there has seldom been a better time to venture into residential property investment,' says Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa. According to the latest PayProp Rental Index for Q1 2025, the national rental market is experiencing its strongest growth in nearly eight years. The average rent in South Africa climbed to R9,132, reflecting an annual increase of 5.6%, the highest quarterly rental growth rate since Q3 2017. This surge is especially noteworthy when considered alongside low inflation levels, which averaged 3.2% in January and February, and dropped to 2.7% in March. This widened the rental-to-inflation gap, offering landlords real-terms rental growth not seen in years. Another key factor making now an opportune moment to enter the landlord market is the record low in tenant arrears. Only 17.0% of tenants were in arrears during Q1 2025, matching the lowest level ever recorded by PayProp. While South Africa's residential rental market is surging, house price growth has been slower and more measured – until recently. The Residential Property Price Index (RPPI) published by Stats SA for January 2025 shows that annual national house price inflation was 5.2%, a modest rise from the revised 5.1% in December 2024. This comes after a period of subdued growth in 2023, when the average annual increase hovered around 1.8%, following even lower rates through much of 2022. However, the momentum is beginning to shift upward. 'This gradual but promising upturn in house prices means that savvy investors can still enter the market while prices remain relatively affordable, before sharper increases potentially take hold later in the year. The current climate offers a compelling mix of capital growth potential and robust rental income streams, particularly in high-demand metros such as Cape Town, Johannesburg, and Tshwane,' says Goslett. What's more, the South African Reserve Bank's decision to cut the prime lending rate by 25 basis points earlier this year – and further reductions hinted at for later in 2025 –improves affordability for prospective property buyers. Lower interest rates reduce bond repayments, enhancing cash flow potential and return on investment for buy-to-let properties. 'We encourage prospective landlords to speak with one of our property professionals to explore investment opportunities tailored to your financial goals. Whether you're looking to grow your wealth through rental income, benefit from capital gains, or secure a retirement nest egg, 2025 is your moment to make the move,' Goslett concludes. Issued by: Kayla Ferguson
IOL News
03-07-2025
- Business
- IOL News
Landlords beware: 26 per cent of rental applicants in South Africa classified as high risk in Q1 2025
Interest rates, supply and demand, popular locations, and property types drive South Africa's property market. Image: Henk Kruger/ANA/African News Agency More than a quarter of South African rental applicants were classed as high-risk in the first quarter of this year. A detailed risk analysis in the latest PayProp Rental Index highlighted that this is a significant challenge for landlords and rental agents. Based on data from the Tenant Assessment Report, PayProp's market-leading tenant screening tool, 26% of prospective tenants fell into the scoring system's highest risk bracket, up from 25% a year ago. 'Landlords are seeing improved returns from healthy rental price growth in 2025, but it's important not to get complacent,' says André van Rooyen, head of sales at PayProp. 'Tenant affordability is lower due to the cost of living in many provinces, and with one in four applicants potentially presenting a payment risk, thorough vetting is non-negotiable,' van Rooyen said. Traditional credit checks were said to offer only part of the picture when it comes to assessing tenant payment reliability, as they score the applicant based on their debt repayment history but often do not take rental payments into account. In contrast, PayProp combines credit scoring with rental payment histories captured from the platform to reveal where tenants fall on the risk spectrum. Analysis by PayProp ahead of a recent training webinar found that it was 94% better at predicting bad tenant behaviour than a traditional credit score when applied to a sample of real tenant data. In the first quarter of this year, 39.6% of lease applicants were rated minimum-risk, 20.0% were low-risk, 14.5% were medium-risk, and 26.0% were high-risk. This distribution across the risk spectrum suggests that rental applicants are becoming more concentrated at both ends of the risk scale lately, making careful tenant selection more important than ever. Income was said to be the strongest determinant of tenant risk. Among applicants earning R80 000 or more per month, 60.6% were classed as presenting minimum risk and just 12.2% as being high-risk. In the lowest income bracket (R10 000 - R20 000), only 23% qualified as minimum risk, while 37% were high-risk. 'Affordability is one of the first things any agent will check, and this helps demonstrate why,' says van Rooyen. 'It also means that careful vetting is even more essential for lower-priced properties, as applicants are more likely to fall into lower income brackets. "However, there are high-risk and low-risk tenants in every income bracket, and using smarter tools helps agents identify low-income, low-affordability tenants who nevertheless have perfect payment records.' Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading Age was also said to play a clear role, as the 20 - 29 age group showed the lowest share of minimum-risk tenants (29.6%), likely due to thinner credit files and shorter rental histories. However, despite being unknown quantities in normal credit scoring terms, this group tends to have more disposable income after debt and rent, making them potentially better prospects than raw scores may suggest. In contrast, 61.3% of applicants over 60 were classified as presenting minimum risk, and tenant risk declined sharply for all age groups over 50, thereby indicating a pattern likely linked to more stable financial positions and mature credit profiles. According to Experian's latest Consumer Default Index (CDI) for the first quarter of this year, despite their active economic roles, young South Africans face barriers in accessing the credit market. Representing nearly 24% of the adult population, the youth segment (consumers around 30 years and younger) was said to account for only 9% of the total credit market, holding just 3% of outstanding debt. Vehicle Asset Finance (14%) and Retail Loans (10%) are the most common credit products for youth, reflecting their current financial needs and market accessibility. In contrast, youth only hold 1% of the Home Loans market, underscoring the long-term financial milestones that remain largely out of reach for many people. Interestingly, the report finds only slight gender-based differences in tenant risk, despite women earning roughly 80% of what men do, according to Stats SA. Some 40.1% of men were assessed as minimum-risk, compared to 39.1% of women. One possible explanation is that women spent 3.2% less of their income on debt repayments than men, improving their overall affordability profile. While trends by income, age and gender offer useful insights, van Rooyen reiterates that every tenant is unique. 'Each demographic contains both high and low-risk individuals,' says van Rooyen. 'That's why risk reporting based on proven payment behaviour is essential for agents managing tenant selection. It's not just about reducing risk for agents, it also ensures that good tenants who pay their rent reliably can go to the front of the line, no matter their income levels or what's left after servicing current debts,' van Rooyen said. 'With more rental applicants falling into the high-risk category than a year ago, the days of relying solely on gut feel or credit scores are behind us. The smartest agencies are combining data sources for a full-circle view of tenant reliability.' According to the South Africa Property Market Predictions for 2025 published by the Landlord Association of South Africa (LASA) in January, the South African property market is set to undergo significant changes in 2025, influenced by shifting economic dynamics, evolving consumer behaviour, and potential legislative amendments. The National Residential and Commercial Landlords Association said the South African Reserve Bank (SARB) was expected to maintain a cautious monetary policy stance in 2025. It said that while inflation may stabilise around the target range of 3% to 6%, marginal interest rate increases could be implemented to manage global economic pressures. This would impact home loan affordability and demand for residential properties, it said. LASA said that despite a challenging global economy, South Africa's GDP growth is forecasted to recover modestly in 2025, supported by mining exports and infrastructure investment. It said urban areas, particularly Gauteng and the Western Cape, were likely to see a resurgence in property development and demand. Independent Media Property
IOL News
02-07-2025
- Business
- IOL News
The changing landscape of rental applications in South Africa
Discover the latest findings from the PayProp Rental Index, revealing that over a quarter of South African rental applicants are classified as high-risk. This analysis explores the implications for landlords and rental agents in 2025. Image: Independent Newspapers. A detailed risk analysis in the latest PayProp Rental Index highlights a significant challenge for landlords and rental agents: more than a quarter of South African rental applicants were classed as high-risk in Q1 2025. Based on data from the Tenant Assessment Report, PayProp's market-leading tenant screening tool, 26% of prospective tenants fell into the scoring system's highest risk bracket, up from 25% a year ago. Landlords are seeing improved returns from healthy rental price growth in 2025, but it's important not to get complacent. Tenant affordability is lower due to the cost of living in many provinces, and with one in four applicants potentially presenting a payment risk, thorough vetting is non-negotiable. Traditional credit checks offer only part of the picture when it comes to assessing tenant payment reliability, as they score the applicant based on their debt repayment history but often don't take rental payments into account. In contrast, PayProp combines credit scoring with rental payment histories captured from the platform to reveal where tenants fall on the risk spectrum. Analysis by PayProp ahead of a recent training webinar found that it was 94% better at predicting bad tenant behaviour than a traditional credit score when applied to a sample of real tenant data. In Q1 2025, ● 39.6% of lease applicants were rated minimum-risk ● 20.0% were low-risk ● 14.5% were medium-risk ● 26.0% were high-risk Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ This distribution across the risk spectrum suggests that rental applicants are becoming more concentrated at both ends of the risk scale lately, making careful tenant selection more important than ever. Income trumps all as a risk predictor As can be expected, income is the strongest determinant of tenant risk. Among applicants earning R80,000 or more per month, 60.6% were classed as presenting minimum risk and just 12.2% as being high-risk. In the lowest income bracket (R10,000 - R20,000), only 23% qualified as minimum-risk, while 37% were high-risk. Affordability is one of the first things any agent will check, and this helps demonstrate why. It also means that careful vetting is even more essential for lower-priced properties, as applicants are more likely to fall into lower income brackets. However, there are high-risk and low-risk tenants in every income bracket, and using smarter tools helps agents identify low-income, low-affordability tenants who nevertheless have perfect payment records. Youth equals uncertainty Age also plays a clear role. The 20 - 29 age group showed the lowest share of minimum-risk tenants (29.6%), likely due to thinner credit files and shorter rental histories. However, despite being unknown quantities in normal credit scoring terms, this group tends to have more disposable income after debt and rent, making them potentially better prospects than raw scores may suggest. In contrast, 61.3% of applicants over 60 were classified as presenting minimum risk, and tenant risk declined sharply for all age groups over 50, which indicates a pattern likely linked to more stable financial positions and mature credit profiles. Debt dynamics by gender Interestingly, the report finds only slight gender-based differences in tenant risk, despite women earning roughly 80% of what men do, according to Stats SA. 40.1% of men were assessed as minimum-risk, compared to 39.1% of women. One possible explanation is that women spent 3.2% less of their income on debt repayments than men, improving their overall affordability profile.
