Latest news with #TenantAssessmentReport
The Citizen
2 days ago
- Business
- The Citizen
More South Africans rent, but arrears and tenant risk rise
A prospective tenant's income remains the most reliable indicator of payment risk, says PayProp. Image: Supplied A prospective tenant's income remains the most reliable indicator of payment risk, says PayProp. Picture: Supplied With high interest rates and rising living costs, more South Africans are being pushed into the rental market – a trend that has worked in favour of landlords, who have seen improved rental returns in 2025. According to the first edition of the 2025 Rode Report, high interest rates remain a key driver of rental demand, discouraging many would-be homebuyers from entering the property market. 'This will continue to push some potential buyers to opt for renting instead,' the report notes. Since September 2024, residential rentals have consistently grown faster than inflation. In the first quarter of 2025, nominal rental growth ranged between 1.2% and 5.4% across South Africa. Three provinces recorded rental increases above the inflation rate, with the Western Cape leading at 5.4%. Read more Here's a list of what your landlord is responsible for in your rented flat However, affordability remains a key constraint that could limit landlords' ability to raise rents further this year, the Rode Report states. ALSO READ: Looking to rent? These are your rights as a tenant Applicant risk rising With household budgets under strain, rental applicants are becoming riskier. 'Increasingly, prospective rental applicants could present a payment risk,' says André van Rooyen, head of sales at rental payment platform PayProp. Data from PayProp's Tenant Assessment Report for the first quarter shows that 26% of prospective tenants fell into the highest risk bracket – up from 25% in the same quarter last year. This means more than a quarter of rental applicants were flagged as high risk. Despite this, the largest group of applicants – 39.6% – was still classified as minimum risk. Around 20% were low risk, and 14.5% were deemed medium risk. Van Rooyen notes that recent data points to a growing polarisation in tenant risk profiles. 'The distribution across the risk spectrum suggests that rental applicants are becoming more concentrated at both ends of the risk scale lately,' he says. 'This means careful tenant selection is more important than ever.' ALSO READ: Average rent in Gauteng tops R9k: How do other provinces measure up? Income still the strongest risk indicator Van Rooyen says a tenant's income remains the most reliable indicator of risk. In the R80 000-and-above income bracket, more than 60% of applicants were classified as minimum risk, with only 12.2% falling into the high-risk category. In contrast, 37% of applicants in the R10 000 to R20 000 income band were rated as high risk, with just 23% classified as minimum risk. 'Affordability is one of the first things any agent will check,' Van Rooyen says, adding that thorough vetting is especially important for lower-priced properties. Younger applicants tend to be riskier tenants, according to PayProp's data. In the 20 to 29 age group, fewer than 30% of applicants were classified as minimum risk – likely due to shorter rental histories and limited credit records. By contrast, 61.3% of applicants over the age of 60 were considered minimum risk. 'Tenant risk declined sharply for all age groups over 50,' Van Rooyen notes, attributing this to more stable finances and well-established credit profiles. ALSO READ: Joburg elites spend more than R90k on monthly rent Defaults increasing Alongside higher applicant risk, rental defaults are also on the rise. According to PayProp's data, 18.3% of tenants are in arrears, owing on average 77.5% of a month's rent. Ross Fitzcharles, founder and CEO of property technology firm Preferential, warns that this financial strain poses a serious challenge for landlords. 'The rising financial strain tenants experience could mean that landlords face a real and growing risk of rent defaults, which can lead to prolonged vacancies and the costly process of legal eviction.' While legislation protects tenants against unlawful eviction, Fitzcharles says the same laws can make it difficult for landlords to remove non-paying tenants. Despite these risks, only 60% of landlords screen tenants before signing leases. 'Screening is critical to help identify reliable tenants who are more likely to meet their financial obligations,' Fitzcharles stresses. This article was republished from Moneyweb. Read the original here.
IOL News
2 days ago
- 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
2 days ago
- 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.
