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Average national rental inflation 5% – Absa

Absa’s Housing Review for the fourth quarter of 2015 published on November 9, reports housing rental indices, as published by Statistics South Africa, showed that national rental inflation averaged 5% y/y in January to September this year, which was above the average headline consumer price inflation rate of 4,5% y/y during this period.

Rental inflation according to StatsSA measured 4,6% for houses, 5% for townhouses and 6% for flats over the nine month period, the bank reported.

Based on research by Tenant Profile Network (TPN) Credit Bureau, the bank found a total of 84,3% of residential tenants were in good standing in the second quarter of the year, comprising those that paid on time (67,4%), those who paid within the grace period (5,5%) and those who paid late (11,4%).

Impaired tenants are those who made only a partial payment (10,1% in the second quarter) and those who did not pay at all (5,6% in the second quarter).

A total of 82% of residential tenants rented for less than R7 000 per month in the second quarter of the year, with the majority (59%) that rented for between R3 000 and R7 000 per month. Only 18% of tenants thus rented for more than R7 000 per month in the second quarter (13% rented for R7 000 ─ R12 000 per month; 4% rented for R12 000 ─ R25 000 per month; and 1% rented for more than R25 000 per month).

An interesting fact, Absa points out, is that only 54% of residential tenants renting for more than R25 000 per month paid on time in the second quarter (the lowest percentage of on time-paying tenants across the rental value bands), while 17% of those renting for above R25 000 paid late and 15% in this value band made a partial payment only (the highest percentages of late-paying and partial-paying tenants across the rental value bands). These trends in the rentals per value band are regarded an indication of the general financial profile of tenants renting residential property.

Absa further reported that research by both PayProp and TPN showed that the provinces of Gauteng, the Northern Cape and the Western Cape had the highest level of monthly residential rentals in the country in the second quarter of 2015, ranging from above R6 000 to more than R7 000 per month. Both Gauteng and the Western Cape have large and prominent metropolitan areas, causing rentals to be in general markedly higher in these regions than in rural areas.

However, rentals in the Northern Cape have increased significantly over the past 2½ years against the background of expanded mining operations in certain regions of the province, impacting the demand for rental housing in these areas, Absa concluded.

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