PayProp
Rental agencies are adopting a wider, more diversified range of service-based fees, reflecting the growing value and range of the services they provide.
These changes are not about increasing costs for landlords and tenants, PayProp says, but about covering the costs and reflecting the value of service delivery fairly and transparently.
“The cost of delivering a compliant, transparent, well-managed rental service has increased over time, and so too has the value agencies provide,” says Michelle Dickens from PayProp. “By diversifying their fees, agents are transparently specifying what they’re charging for specific services, and not simply lumping it all together under Commission. In so doing, they can ensure they’re fairly compensated for essential services such as tenant screening, property inspections and deposit management, which allows them to continue providing and improving service delivery to landlords and tenants.”
It’s a cultural shift helped by better market data. In a recent survey conducted by PayProp of its data publication audience, more than a third (38%) of rental agency respondents said they had adjusted their business strategies based on last year’s State of the Rental Industry Report, which shared an in-depth review of the fees rental agencies charge.
Among them, 40% introduced a monthly admin fee for tenants and 24% adjusted their commission structures. Other notable developments include the introduction of inspection fees, tenant screening fees and bank charge recovery, which all point to a more diversified and sustainable business model.
Dickens says evolving fee structures are a sign of a maturing rental industry, whereby agents are drawing on industry benchmarks to guide pricing models and identify new service and revenue opportunities. By seeing what services others charge for and how much, agencies can make informed, market-based decisions that enhance portfolio value and business sustainability, and turn residential rentals into a professionalised, profitable business.
“The other side of the coin is affordability. The point of market-related rents is not to price a property so high that you price your landlords, yourself and your tenants out of the market,” Dickens adds. “That’s the beauty of market forces: too low and landlords can’t survive, potentially causing rental accommodation to disappear off the market. Too high, and tenants will look elsewhere. Either way, nobody wins.”
This evolution aligns with a trend towards fully managed rental portfolios, a model PayProp says makes utter sense based on data from its ongoing portfolio performance analyses for customers, as well as management reports which provide business and market intelligence, and industry sentiment as reported by the State of the Rental Industry Report.
And agencies are following suit: Last year’s report showed that 86% of agencies now fully manage at least half of their residential rental portfolio, compared to 79% in 2023. This has a direct impact on improved service delivery to landlords and tenants, and on reducing agencies’ cost base to deliver those services – both in time and money spent doing so. Accordingly, a sizeable portion of survey respondents reported new or adjusted fees as agreed with landlords and tenants, and Dickens says this should be seen as a price correction.
“As long as fees are transparent, legal, ethical, and stated in the lease agreement, a diversified fee structure benefits everyone by supporting better management, compliance and care,” she concludes.
PayProp is currently inviting property professionals across South Africa to share their business plans, outlook and insights in this year’s State of the Rental Industry survey.
