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EXCLUSIVE: #FeesMustFall caused biggest drop in rental payments in years

By Myolisi - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=44415562

The student accommodation game is similar to retirement in that demand exceeds supply and there will always be a demand for safe, secure and affordable residences.

Many investors have jumped on this bandwagon, hoping to cash in on what they see as a proverbial cash cow.

There is no doubt that investing in student accommodation pays off, but what effect has the countrywide #FeesMustFall protests had on landlords’ abilities to collect rentals?

We turned to one of South Africa’s top credit bureaus which deals specifically with tenant payment behaviour, Tenant Profile Network, and were shocked to see what effect last year’s student protests had on landlords.

Click to enlarge

Click to enlarge

From the graphic provided by TPN, a massive drop in tenant payment can be seen – where more than 25% of student rentals were either late, not paid in full or not paid altogether. The drop also occurred right at the beginning of the academic year in February 2016, and only recovered to more acceptable levels in June 2016 – with the academic year closing with just more than 92% of student leases in good standing.

According to TPN MD, Michelle Dickens, landlords are generally better protected when a parent is involved in signing or co-signing the lease. “Conventionally, the age of residential tenants peaks at 30, as tenants start moving into homeownership,” she says. “However, the numbers change for student accommodation where the age of a student renting property peaks at 21 and the parent peaks at 53.

TPN data,however, reveals that during the February/March 2016 drop in good standing period, figures were rounded off to 30% being parents/guardians, 60% students and 10% unknown (the age of the tenant means they could be parents or students – as would be the case with graduate students).

At the end of 2015, TPN’s research on payment behavioural analysis showed that 94% of parents paying for student accommodation were in good standing compared to a substantially lower average for students at 77%, versus the 2015 national average of 84% of all tenants in good standing.

During the second quarter of 2016 the national rating of tenants in good standing recovered to 85.08% after a drop to 82.17% in Q1. Some 67.46% of tenants paid their rental on time, 6.29% paid during the “grace period” and 11.33% paid late.

This obviously presents a very real concern for investors in student accommodation. Landlords would do well to join services like the TPN Lease Pack, PayPropHouseMe, RentMaster and RentDoc which each provide various solutions, from drafting compliant leases to vetting tenants and guaranteeing rental.


In October last year, Universities South Africa (USAf) estimated that the damage caused by the #FeesMustFall protests over the last year-and-a-half would cost between R700m to R800m to repair, based on damages reported at the various affected universities.

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david.steynberg@gmail.com

David A Steynberg, managing editor and director of HomeTimes, has more than 10 years of experience as both a journalist and editor, having headed up Business Day’s HomeFront supplement, SAPOA’s range of four printed titles, digimags Asset in Africa and the South African Planning Institute’s official title, Planning Africa, as well as B2B titles, Building Africa and Water, Sewage & Effluent magazines. He began his career at Farmer’s Weekly magazine before moving on to People Magazine where he was awarded two Excellence Awards for Best Real Life feature as well as Writer of the Year runner-up. He is also a past fellow of the International Women’s Media Foundation.

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