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New rental reveals from TPN’s latest tenant survey

Waldo Marcus

MAIN IMAGE: Waldo Marcus, industry principal at TPN from MRI Software

Senior writer

Four significant conclusions have been highlighted in TPN’s latest annual Tenant Survey Report

  • More women than men are renting.
  • Lower rental escalations and no deposit are the preferred lease structures.
  • Security is a key consideration.
  • Landlords are failing to make repairs.

“High interest rates, inflation and restricted employment opportunities are having a significant impact on the ability of many people to own their homes,” confirms Waldo Marcus, Industry Principal at TPN from MRI Software. “However, people don’t only rent because it’s all they can afford.”

This conclusion is based on some 19 000 tenants who responded to the TPN survey request, which explored the reasons behind rental decisions:

  • 48.1% can’t afford to buy property
  • 17% rent because they want the flexibility of being able to move;
  • 11,4% believe it is cheaper to rent than own;
  • 9.9%  have a poor credit record preventing them from being a homeowner;
  • 8,1% – Can’t afford to buy property
  • 2,2% don’t want to incur debt;
  • 1,8% are influenced by political uncertainty, so they prefer to rent rather than purchase;
  • 0,8% are in the process of, or planning to, emigrate, and the balance cited ‘other’ reasons.

Women vs Men

Women tend to rent in lower rental value bands than men, with 10.4% of female tenants renting for R3 000 or less per month and 0.4% paying R25 000 or more per month for their rental accommodation.

Most men pay between R4 500 and R7 000 per month, with a third renting in the R7 000 to R12 000 rental value bands. Only 0,8% of men pay R25 000 or more a month.

While more than half of female respondents said they are renting as they can’t afford to purchase a property, this is 10.2% more than men grappling with different concerns, confirms Marcus. “Men are more preoccupied with South Africa’s political uncertainty, are considering or are in the process of emigrating, and are struggling more than women with bad credit records, particularly those between the ages 40 and 49. Men are also more inclined to believe renting is cheaper than buying property.

The preferred lease structures

Regarding the lease structure and terms, the respondents prefer a lower rental escalation with no deposit requirements. They are prepared to compromise by committing to a longer lease period. Waldo says that this type of lease structure also benefits landlords “because it offers more security, fewer vacancies, and a predictable income stream.

“The downside is that it could impact returns. While deposits offer investors and managers some security, they are a barrier for tenants and prospective tenants, especially in the lower rental value bands. Alternative solutions like deposit insurance are a relatively new trend that has appeared in recent years to help tenants and landlords manage, collect, and provide security deposits.”

Flexible lease options are gaining in popularity and rank highest in the rental band R4 500 to R7 000. Their choices include:

  • a month-to-month lease, which is primarily fuelled by economic, social, and political uncertainty (just under a third of respondents).
  • rent-to-own appeals to 26,7% of tenants.

What this reveals, says Marcus, is that many people continue to aspire to property ownership. “Property owners, therefore, need to look at innovative funding models that will appeal to both parties. The upside is that developers can convert tenants into owners based on a property’s life cycle and access to capital in the longer term.”

Amenities and types of rental properties

Amenities such as collaborative working spaces, communal gardens, and facilities are less of an attraction than lease flexibility:

  • 3% of respondents identified special amenities as a rental need.
  • 42% of tenants do not have a specific property type preference.
  • Free-standing homes are the preferred option for 20.2% of tenants.
  • Sectional Title units and townhouses received 19% interest.
  • Clusters in a complex elicited the lowest interest at 18.8%.

“Women prefer sectional-titled flats, townhouses, and clusters in a complex to a free-standing house while men prefer free-standing houses, followed by a cluster in a complex, and have the least preference for a sectional title flat or townhouse,” says Marcus.

Security is a priority

Price and security are primary to tenants, followed by property size and space. “This highlights the need for property developers and managers to prioritise these aspects in their offerings. This could involve competitive rental prices, ensuring top-notch security measures, and providing spacious and well-designed properties,” says Marcus. “Financial incentives such as one month’s free rental or no deposits, and new, green or eco-friendly developments are not high on the priority list when selecting a new rental property.” 

Landlord lapses in maintenance

Respondents indicated that landlords failing to attend to repairs and maintenance is a greater concern than meeting rental obligations, which is their secondary challenge. Access to parking and its availability followed, and in the fourth spot, a lack of control over utility costs.

“Understanding tenant preferences is not just about knowing what they want, but about using this knowledge to shape new developments, investment strategies, marketing activity, and resource allocation. This understanding translates into lower vacancies, improved rental growth, and a balanced future demand and supply, making it a practical and valuable tool for any real estate portfolio,” concludes Marcus.

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