 I'm so excited to be participating in Private Property's first virtual expo. For this particular stage, what I've created is the effect that lockdown had on the residential rental market. So I've created an agenda for us today. What are we going to talk about? We're going to talk about the effect of lockdown on the national residential rental market. We're going to drill into the rental market in terms of value brand, so the high end of the market versus the low end of the market. I want to talk a little bit about the provinces and specifically Houtang, Western Cape, Quasi Lunatale and the Eastern Cape. So coming into lockdown, what TPN realized right at the beginning was that rent collection was potentially going to be at risk as a result of loss of earnings. Those loss of earnings might be permanent, they might have been temporary, they might have been in full, they might have been in pot. And coming into the lockdown, TPN created a rental recovery pack. Now post the lockdown, we can see just how bad that effect had on the market. So this is the wage bull growth and we can see that during the lockdown period, the wage bull deteriorated by minus 7% in that period. Also supported by Bank of South Africa, who had their national take home pay index. The national take home pay index indicated that from June 2020, compared to a year ago in June 2019, one in five people did not earn an income. In fact, it was worse in the weekly wage and casual wage earners, where 35% of those earners did not earn an income in June 2020 when compared to June 2019. And for our monthly earners, it was 9%. So nearly one in 10 monthly earners did not earn an income for the month of June 2020 when compared to June 2019. And that was driven as a result of, for example, in our retail market, we had negative growth of 49, nearly 50% in the retail market. As well as in the manufacturing output, nearly 50% deterioration in output in manufacturing as well. So how did that effect rentals in quarter two? Well, coming into quarter two in quarter one, we had 81.5% of tenants in good standing. It had deteriorated since the period of 2014. So there had been a slow, steady deterioration from 86% at its peak in the residential market. This particular graph that I'm showing you now, the green line is the residential rental market, and the blue line is the commercial rental market. And you will see back in 2008, 2009, when we had the global financial crisis, that residential rentals deteriorated to 71%. What do I mean by good standing? Well, a good standing tenant is a tenant who has settled their account in full. And that is any arrears that were brought forward, the rent that was charged for that particular month, and any additional charges that the tenant might have. Things like utilities, parking, etc. That account needs to be settled in full by the end of the month. So at the global financial crisis, at the bottom of that peak of the crisis, but the bottom of the rental payment collection, 71% of residential tenants were in good standing. We had that slow climb up to 86% in 2013-14. And as the market in general, the economy in South Africa has been on a slow deterioration since that period. We've seen a slow deterioration of rental collections as well. Quarter one, coming into the lockdown, 81.5% of tenants in good standing. Quarter two, the lockdown happens. People are restricted from being able to move. People have lost their income. And the result of that is an 8% deterioration in tenants in good standing down to 73.5%. Far more severe, however, in the commercial market, where you'll see on the blue line coming into lockdown, 77% of commercial tenants were in good standing with their rent. And in quarter two, that deteriorated down to 50%. In other words, only one in two tenants able to make full payment on their rental agreements. What does it look like from a recovery perspective? Well, during the month of July and August, we've seen maybe a percentage improvement in the residential market. It bottomed out in the month of May at 71%. And so we've seen a slight improvement, but nothing exciting. It's flat lining at around about that 73-74%. In the commercial market, we've seen recovery in the retail sector. Retail is performing the worst and they're sitting at 45% of tenants in good standing. Industrial next, at 58% of tenants in good standing. And offices, the most paid up at 67% of tenants in good standing. Next, I want to share with you the market strength index. This is a combination of demand for rental properties as well as supply of rental properties. It's a survey that we put out. And you will notice that the green bar at the top indicates the demand index. So how much demand is there for rental properties from tenants at the moment? And that green bar slowly deteriorating over a period of time. The blue bar indicates supply. So how much stock is on the market available to tenants at the moment? And you'll see that that blue bar is starting to increase as more stock becomes available and less tenants are available. Why are less tenants available? Well, so many tenants as a result of having lost their income have moved in with friends and family. Also, on the buying side, we've seen this wonderful growth in first-time buyers in the below 38 age group. And so we're starting to see, and that's our tenant market. So we're starting to see a shift in terms of people who have lost their income moving in with friends and family, and people actually being able to move into home ownership driven by as a result of these really low interest rates that we have at the moment. From a supplier side, though, we did have quite a lot of construction in the 2018-2019 period. So a lot of properties coming onto the market at that particular point in time. Coupled with during the lockdown, we also had a change in short-term rentals. So because of the restriction of short-term letting, many short-term landlords move their properties from short-term late into long-term late, also growing the stock of properties during this lockdown period. What does that then do to rental escalation? Well, as a result of having a market where there's an oversupply of properties, more properties available than tenants looking, that drives down prices. So we've seen from a peak of nearly 6% of rental escalations year on year, that is deteriorated in the lockdown month to 1.6%. So currently, at the moment, what does it look like? A 1.6% increase on rent year on year at the moment. And certainly, there are areas that are finding more challenging. Definitely, on our upper end of the market, rents above $12,000. We're already seeing in quarter two, negative escalation. So we're seeing prices reducing in the upper end of the market, driven by that downscale of people into the lower rental brackets. So what does that do overall? It drives up vacancies. So vacancies, they're more properties that are available, as tenants have a world of choice for properties that they can choose from. And we've seen vacancy rates now at the highest point that we've been surveying the data, and that's at 11.3% vacancies nationally around the country. Increasing by 4% in the last two quarters. So in quarter four of 2019, that vacancy rate was only down at 7.47%. Popping up in quarter one to 9%, and that was pre-lockdown. And then in the lockdown period, moving up to 11%. This particular graph now talks about consumers in general in terms of their overall credit scores. So what TPN does, our entire active tenant database, we re-score every month. We re-score them every month to see what is the risk of our client's portfolio month on month. And you'll see the blue line running along the X-axis. And that tells us the overall score of all tenants around the country as a percentage. TPN scores our tenants as an A, a B, or a C, an A as an excellent tenant, a B as a good tenant, a C as an average tenant. Those are our quality tenants. That's what we're scoring here. Our delinquent tenants would buy our E's and our F's, an E being below average and an F being poor. So we're scoring our quality tenants, A, B's and C's. And you'll see in the month of April, coming into lockdown, 67% of tenants around the country were scoring A, B and C quality tenants. In the month of May, that increased to 68%, fascinating. Although not so when you can explain it. So what happened in the month of May? Many credit providers, as well as landlords and state agents, went out and said we are going to give payment holidays. We know people haven't got an income, so let's give consumers payment holidays. And those payment holidays are reflected in your credit profile. And as a result of that, actually it had an improving status on many consumers. And that meant that out of all the national tenants that TPN re-credits checks on a monthly basis, it increased by 1%. 68% of tenants in South Africa were then quality tenants by their score. Coming in then to the following month, in the month of June, we've dropped down to 67%. And for the last three months, that has deteriorated actually down to 65%. As the effects, as the long-term effects of COVID take effect, those payment holidays are now over. People are going back to work, the economy is back open again. The problem is the economy is not back open at 100%. Businesses are not back to business as usual. And so it takes time for them to rebuild to what they were doing prior to the lockdown. And even worse than that, some businesses simply didn't open. So many businesses have closed down permanently, leaving many of their employees with artwork going forward. So let's look at the rental value analysis by rental value. So TPN looks at data across five different rental buckets. Our tenants below $3,000 per month, our low end of the market. Our tenants in the $3,000 to $7,000 bracket rent per month. In the $7,000 to $12,000 bracket, $12,000 to $25,000 and up. So what can I tell you about the distribution? Importantly, our high end of the market are rents above $25,000 per month. You'll see that that distribution is only less than 1%. 0.9% of the market rents for above $25,000 per month. The interesting part of this particular graph is that has deteriorated quarter on quarter from 1.8% down to 0.9%. So that's a 50% deterioration and the number of tenants in that particular distribution bracket. The $3,000 to $7,000 bracket has grown. It's grown as tenants have moved down, downscaled from above $12,000 to $25,000 and from the $7,000 to $12,000 they've moved down back into the $3,000 to $7,000 bracket. Interestingly, the below $3,000 bracket has also had a decline in the number of tenants in that particular bracket. And that's not driven by demand. The demand is there. It's driven by a lack of earnings, particularly for that segment of the market. And if I reflect back on BankServe Africa's National Take-Home Pay Index, you'll remember that those distribution of consumers were the most affected, where 35% of individuals in that category had lost their earnings from June 2020 compared to June 2019. So let's talk about rental payment profile. Here we look at the good standing of the tenants based on the category of rent, the value of rent that they are paying. So you will see that now the worst performing tenants are the tenants in the above $25,000. Where only 60% of these tenants are able to pay their rent on time and in full. Quite a big deterioration, and they are now the worst performing when the past it was the below $3,000 tenants. As you'll remember, there's only 0.9% of the tenants within this category, whereas there's nearly 15% tenants in the below $3,000 rent category. So a far more severe impact if you're in the below $3,000 rent category. But still only 62% of tenants in the below $3,000 rent category are able to maintain their good standing status being paid up by the end of the month, including all of the rears that they may have. So what are the best performing tenants? The best performing tenants are the tenants in the below $3,000 rent category. And they have been for a very long time, but they make up a small portion. They only make up 22% of the market share. Still, that category is the best performing. Our $3,000 to $7,000 rent category, remember this is where the big distribution is 56% of tenants in this distribution category. If we were to look at this category and split it in two, it's actually the $3,000 to $4,500 rent tenants that are pulling that good standing down. And it is our $4,500 to $7,000 rent category that's pushing the good standing up. So there seems to be a cutoff at $4,500. And so if you have a rental for less than $4,500, you are going to find it more challenging from a rent collection perspective. And if you move into that $4,500 to $7,000 and $7,000 to $12,000, you're going to find that that is a much easier segment on the market to collect rent from. Let's look at the market strength index. And you'll notice that market strength is deteriorating across all the market categories. Worst at the luxury end of the market. And then at the very low end of the market, the below $3,000, actually we've had market strength improvement. There is more demand for rentals in the below $3,000 rent category. As I said, the challenge there in that particular category of the market is that the quality of tenant is not good enough to be able to place at the moment. And actually what we're seeing is we're seeing tenants because they've been declined at one property moving to many different landlords and estate agents looking for placement. Vacancy, again, not surprising if we've got the worst performing in terms of rent collection at the top end at the low end. Our market strength is worst at the top end. And yes, we have market strength at the low end, but we know that the problem there is the quality of tenants. Not surprising then that the vacancies at the above $25,000 rentals peaking at 23%. Remember when we spoke about the fact that the distribution in that segment of the market had shrunk by 50%. So from 1.8% down to 0.9%, we've had a lot of tenants exit that end of the market and as a result of that, vacancies are up to 23%. At the low end of the market, the below $3,000 rent tenancy, our vacancies are sitting at 17%. Again, not as a result of demand because we still have demand at that end of the market. It's driven by the quality of application. Our best performing segments are those 4,500 to 7,000 and the 7 to 12,000, both of those sitting at around about 10% in terms of vacancies. Rental escalations, well, as we've said, if there's less demand, there's higher vacancies that's going to drive down the pricing. Where's the pricing being driven down by? In that low end of the market, we're still seeing escalations above 2%, on average, we're seeing them at 1.6%, but at the luxury end of the market, there's negative escalation. So we've already seen price reductions. I can tell you that for quarter three, the preliminary data shows us that not only is it the above 12,000 segment of the market that we're seeing negative escalation, but that is now crept into the 7 to 12,000 rent market. So even in that mid-tier 7 to 12,000, we're starting to see negative escalation coming through as more tenants downscale. So, provincially, what are we seeing from a provincial perspective? Western Cape remains top of the pops. So Western Cape historically have always been the province that has had the easiest time in terms of getting their tenants to pay their rent on time and in full, and that still remains above 80% in the lockdown quarter. And in fact, Eastern Cape is such a fascinating province as well, because they've maintained at 79% in good standing as well. Remember that overall nationally, 73.5% of tenants are in good standing, and Khartin being that dark blue line at the bottom, they're sitting at 71% in good standing, and Quasulina Tull right down to 70% of their tenants in good standing. Literally, they're nearly one in three tenants battling to pay their rent on time and in full. So we've got it in terms of our escalations. Western Cape, and that's the red line at the top. You'll see how that's come off. It's high of 89% in the past, and we've had that slow deterioration but really escalating in the lockdown period. They're sitting at half a percent escalation at the moment. To be honest, they've had the benefit of higher escalations leading up to this point, and that was driven by immigration down into the Western Cape province. The wheels fell off in 2018 when we had the drought, and property prices were so expensive that many people chose to slow down on those immigration moves, and that had an impact on the rental price escalations, and we started to see from not only from a sales perspective but also from a rental perspective. Already from 2018, we started to see a deterioration in Western Cape's high escalation prices. Compare that to Khartin. Khartin kind of tracks the national average, and we're sitting at around about one and a half percent escalation for our Khartin properties. From a quarter three preliminary data, I can tell you that Western Cape has entered into the negative escalation, so they're the only province now to have entered negative escalation preliminary for quarter 13. Market strength index. Khartin and Western Cape are the worst performing, so both of those market strength are sitting at 38%. 50% or 50% would be market equilibrium. 50 would mean that we have sufficient demand to meet the supplier. Anything above 50, we have a market that has more demand than supply. Anything below 50, and we have a market that has, it's oversupplied, it's overstocked, and Western Cape and Khartin absolutely sitting in that overstocked scenario, and that will then drive vacancies in those two particular areas. Eastern Cape absolutely hasn't benefited from construction leading up to the lockdown, and as a result of that, we still see a market that has sufficient demand to meet the supply, and Quasulinatal slightly below that at 45. Quasulinatal will be affected by those short-term lets. So in our areas where we have coastal towns, where we have airbnbs and holidaylets, those sort of areas will be affected as those properties move off the short-term let and into the long-term let market. So let's look at the vacancy rates provincially then. We've got national, as I said, at 11.39%. Khartin sitting at 11% as well. Quasulinatal up to 13%, and Western Cape still sitting at 9.8%. So the best province in terms of our vacancy rates. Right, let's draw down into Khartin, and I've only got a couple slides per province, and this was really to show those market strengths on a per province basis. And you'll note how the green bar, that being the demand deteriorating and getting thinner and thinner and smaller and smaller, driven in the past as tenants had longer stays in properties. So we were showing that the TPN data was indicating that up to two years, the average stay in a property was up to two years, as tenants chose just to remain longer in properties, and that was driven by, as we know, there was low escalations, and so tenants were able to negotiate lower escalations and stay where they are. Because ultimately, you rather have a tenant in your property for longer and not have to pay the costs associated with placements, commission finding new tenants, the maintenance, the cleanup, and a potential one month vacancy as you turn over to your next tenant. But we have also seen, coupled with that, a growth in supply and the housing area. Particularly the 2018-2019 period, as there was a lot of construction and new builds coming into the market, and those new builds were really being pumped into the residential rental market space as opposed to the sales space. Sales, as we know, have been very weak, and so a lot of those new builds came into the rental market stock. How did that impact in the different areas? Well, the worst vacancy rates were faulted in the areas of Santon, Soweto, and Ramboog. Santon absolutely because they're at the high end of the market, and a lot of those tenants were downscaling, and Soweto because we're at the low end of the market, and each of those areas suffering high vacancies for different reasons. Areas like Centurion and the Westrend, suffering the least at only 5.7%, for example, for the Centurion area. So let's look at the Western Cape. The Western Cape, I love this graph, because this really, really shows how the Western Cape demand was so high in 2016, because immigration was happening and people were moving down. That demand stayed really high. Those green bars stayed really, really high, and there was so little demand. There was so little supply, those blue bars. There was so little supply of property in the Western Cape. And then 2018 drought, and immigration stopped. People stopped moving down. Not just a immigration problem, but a holiday problem as well. 300,000 less people to the Western Cape at that year end. And that drove landlords to take their properties off the short-term late at that period and put it into the long-term late, driving up supply as a result of that. And because the Western Cape had had those extraordinary good rental escalations in the past, that then drove up prices, making it more or less affordable, less people then in the market looking. Vacancy rates then felt the least in the northern suburbs. As we know, the northern suburbs are the more affordable suburbs in the Western Cape area. And so those vacancy rates only sitting at 6.6% versus places like the Winelands and the southern suburbs and more expensive areas, the vacancy rates. To be fair, the Winelands are probably driven by those Stellenbosch areas where we have a lot of student accommodation. And as we know, the varsities were closed. No one was renting for student accommodation and therefore pushing up the vacancies in those areas as well. So let's look at Quasulunatal. From a Quasulunatal perspective, again, we've had... It kind of tracks the market strength, kind of tracks along that 50%, sufficient demand, sufficient supply, a really comfortable position for Quasulunatal. But as we've seen recently, we've started to see that there's been more and more supply brought onto the market. There has been an increase in construction in the Quasulunatal area. More construction with the same amount of demand means that your market strength is going to deteriorate a little bit as well. So where we see the vacancies, well, the vacancies are in Etzekuini, sitting at 19% as well. Driven twofold, the low end of the market rentals, we know that Quasulunatal has low end of the market rentals, also driven by those short-term lets coming back into the long-term let market. Let's talk a little bit about the eastern Cape then. And the eastern Cape supply index is really, really poor, leading up to the lockdown, really poor, and a lot of demand. So the eastern Cape market is still very attractive for landals because it remains a landlord market. And even in the lockdown period, the market strength remains above 50, so we still have more demand than there is supply for properties in the eastern Cape market. And if we look back to how tenants pay in the eastern Cape, we know that their deterioration in the lockdown period deteriorated to 79%. So the eastern Cape really looks good from a risk perspective in terms of collection, and we still have lots of demand over there. Let's talk a little bit about the vacancies, Buffalo City sitting at 4%, and Port Elizabeth sitting at just below 10% at 9%. So still not bad vacancies, considering where Santana and Soweto are sitting at 20%. Our five smaller provinces just in closing, also sitting with sufficient market strength, we're sitting with enough demand to meet the supply in our five smaller provinces. Folks, that's the end of our session for today. I really enjoyed presenting the TPN rental analysis for quarter two and quarter three lockdown periods.