Rising living costs breed tenant fraud

A spike in fraud in SA's rental property market may be a result of the rising cost of living.

Falsified bank statements, employer documents and fake IDs are being used by people trying to secure a place to live, according to private lending company Paragon Lending Solutions, based on what it is hearing in the market.

According to PayProp's quarterly research into the rental market, only one in four tenants is paying rent in full each month, the report on rental trends for the first quarter of 2018 found.

The jump in the cost of living, the wavering economy and unemployment reaching a 27.5% high have all played a role.

Paragon Lending Solutions recommends legal and personal background searches of prospective tenants, as well as the checking of references.

The Prevention of Illegal Eviction from and Unlawful Occupation of Land Act protects tenants. 

Landlords are encouraged to use discretion with long-term tenants, according to the report, because people are spending an average of 42% more than they are making. Vacancy rates have increased to 8%.

"Your tenants are probably worse off now than when you placed them," Paragon Lending Solutions said.

"This means that landlords who have good tenants who pay in full and on time should do everything in their power to hold on to them." 

To retain good tenants, landlords could delay or reduce annual rent increases or grant  tenants payment reprieves if finances are tight.

The report found that rental growth rates have not kept pace with the country’s inflation rate, and have been slowing across the board. Since January 2017, the growth rate has dropped from 8.3% to 3.7%. KwaZulu-Natal and Limpopo are still showing negative growth rates - rentals are actually falling.

Landlords are increasingly moving to Airbnb rentals rather than sticking with long-term tenants, the report said. This way, they make more money over a shorter period.

"For a lot of investors wanting to make a quick buck, it’s a no-brainer," the report said.

This, however, has created oversaturation in the short-term rental market, pushing rentals lower.