Landlords beware: 26 per cent of rental applicants in South Africa classified as high risk in Q1 2025

IOL News

6 hours ago

Interest rates, supply and demand, popular locations, and property types drive South Africa's property market.
Image: Henk Kruger/ANA/African News Agency
More than a quarter of South African rental applicants were classed as high-risk in the first quarter of this year.
A detailed risk analysis in the latest PayProp Rental Index highlighted that this is a significant challenge for landlords and rental agents.
Based on data from the Tenant Assessment Report, PayProp's market-leading tenant screening tool, 26% of prospective tenants fell into the scoring system's highest risk bracket, up from 25% a year ago.
'Landlords are seeing improved returns from healthy rental price growth in 2025, but it's important not to get complacent,' says André van Rooyen, head of sales at PayProp.
'Tenant affordability is lower due to the cost of living in many provinces, and with one in four applicants potentially presenting a payment risk, thorough vetting is non-negotiable,' van Rooyen said.
Traditional credit checks were said to offer only part of the picture when it comes to assessing tenant payment reliability, as they score the applicant based on their debt repayment history but often do not take rental payments into account.
In contrast, PayProp combines credit scoring with rental payment histories captured from the platform to reveal where tenants fall on the risk spectrum.
Analysis by PayProp ahead of a recent training webinar found that it was 94% better at predicting bad tenant behaviour than a traditional credit score when applied to a sample of real tenant data.
In the first quarter of this year, 39.6% of lease applicants were rated minimum-risk, 20.0% were low-risk, 14.5% were medium-risk, and 26.0% were high-risk.
This distribution across the risk spectrum suggests that rental applicants are becoming more concentrated at both ends of the risk scale lately, making careful tenant selection more important than ever.
Income was said to be the strongest determinant of tenant risk. Among applicants earning R80 000 or more per month, 60.6% were classed as presenting minimum risk and just 12.2% as being high-risk. In the lowest income bracket (R10 000 - R20 000), only 23% qualified as minimum risk, while 37% were high-risk.
'Affordability is one of the first things any agent will check, and this helps demonstrate why,' says van Rooyen. 'It also means that careful vetting is even more essential for lower-priced properties, as applicants are more likely to fall into lower income brackets.
"However, there are high-risk and low-risk tenants in every income bracket, and using smarter tools helps agents identify low-income, low-affordability tenants who nevertheless have perfect payment records.'
Video Player is loading.
Play Video
Play
Unmute
Current Time
0:00
/
Duration
-:-
Loaded :
0%
Stream Type LIVE
Seek to live, currently behind live
LIVE
Remaining Time
-
0:00
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
Text Color White Black Red Green Blue Yellow Magenta Cyan
Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan
Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan
Transparency Transparent Semi-Transparent Opaque
Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps
Reset
restore all settings to the default values Done
Close Modal Dialog
End of dialog window.
Advertisement
Next
Stay
Close ✕
Ad loading
Age was also said to play a clear role, as the 20 - 29 age group showed the lowest share of minimum-risk tenants (29.6%), likely due to thinner credit files and shorter rental histories.
However, despite being unknown quantities in normal credit scoring terms, this group tends to have more disposable income after debt and rent, making them potentially better prospects than raw scores may suggest.
In contrast, 61.3% of applicants over 60 were classified as presenting minimum risk, and tenant risk declined sharply for all age groups over 50, thereby indicating a pattern likely linked to more stable financial positions and mature credit profiles.
According to Experian's latest Consumer Default Index (CDI) for the first quarter of this year, despite their active economic roles, young South Africans face barriers in accessing the credit market.
Representing nearly 24% of the adult population, the youth segment (consumers around 30 years and younger) was said to account for only 9% of the total credit market, holding just 3% of outstanding debt.
Vehicle Asset Finance (14%) and Retail Loans (10%) are the most common credit products for youth, reflecting their current financial needs and market accessibility. In contrast, youth only hold 1% of the Home Loans market, underscoring the long-term financial milestones that remain largely out of reach for many people.
Interestingly, the report finds only slight gender-based differences in tenant risk, despite women earning roughly 80% of what men do, according to Stats SA.
Some 40.1% of men were assessed as minimum-risk, compared to 39.1% of women. One possible explanation is that women spent 3.2% less of their income on debt repayments than men, improving their overall affordability profile.
While trends by income, age and gender offer useful insights, van Rooyen reiterates that every tenant is unique.
'Each demographic contains both high and low-risk individuals,' says van Rooyen.
'That's why risk reporting based on proven payment behaviour is essential for agents managing tenant selection. It's not just about reducing risk for agents, it also ensures that good tenants who pay their rent reliably can go to the front of the line, no matter their income levels or what's left after servicing current debts,' van Rooyen said.
'With more rental applicants falling into the high-risk category than a year ago, the days of relying solely on gut feel or credit scores are behind us. The smartest agencies are combining data sources for a full-circle view of tenant reliability.'
According to the South Africa Property Market Predictions for 2025 published by the Landlord Association of South Africa (LASA) in January, the South African property market is set to undergo significant changes in 2025, influenced by shifting economic dynamics, evolving consumer behaviour, and potential legislative amendments.
The National Residential and Commercial Landlords Association said the South African Reserve Bank (SARB) was expected to maintain a cautious monetary policy stance in 2025.
It said that while inflation may stabilise around the target range of 3% to 6%, marginal interest rate increases could be implemented to manage global economic pressures. This would impact home loan affordability and demand for residential properties, it said.
LASA said that despite a challenging global economy, South Africa's GDP growth is forecasted to recover modestly in 2025, supported by mining exports and infrastructure investment. It said urban areas, particularly Gauteng and the Western Cape, were likely to see a resurgence in property development and demand.
Independent Media Property