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TPN Vacancy Survey: Continuing into 2017 vacancy rates may increase

Glass half empty_fullThe TPN (Tenant Profiling Network) Vacancy Survey asks estate agents and landlords to submit quarterly feedback of how many properties they manage as well as how many of those managed properties are currently vacant.

The percentage of vacant residential properties increased slightly to 6.62% in Q4 2016 from 6.53% the previous quarter. Two of the price band categories experienced a decrease over this period. Vacancies in the below R3,000 per month rental bracket decreased to 3.02% while vacancy rate in the R12,000 to R25,000 rental bracket decreased to 9.77% from the previous quarter.140617 Vacancy Survey Graphs PR-1

The TPN Rental Market Strength Index was closer to equilibrium this reporting period, at 59.48% compared to the 61.47% it was the previous quarter, while the Demand Rating continued its decline from 85.41% the year before to the 76.37% in Q4 2016.

TPN said that the declining Demand Rating could be attributed to tenants both choosing to remain in longer leases; to cut back on costs associated with moving properties, as well as landlords holding on to quality tenants, even at an opportunity cost of muted rental escalations – 5.62% in the 4th quarter 2016.

At the same time the Supply Rating was 59.54%, indicative of a market where demand for rental accommodation was still higher than demand, suggesting that vacancies are set to decline. However, the Q4 2016 survey revealed an interesting, countering trend: The number of quality tenant applications has started to deteriorate, but the number of quality tenants actually placed continues to improve which suggest that vacancy rates may increase further going in to 2017.140617 Vacancy Survey Graphs PR-3

Cape Town was the notable exception, where the Demand Rating of 93.58% and a much muted Supply Rating of 38.53% is stoking tenant frustration as properties become more unaffordable based on double digit escalations of 12 to 14% over the last 18 months.

It would be remiss not to point out that the high escalations have not translated into payment delinquencies as tenants in the Western Cape continue the trend of “best rental paying province” with 88.85% of their tenants in good standing. In contrast Gauteng has been under-performing, despite that fact that the province is in almost perfect equilibrium the Market Strength Index is a near perfect 50.76% with rental escalation more closely linked to CPI.

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