Surprising number of SA home owners are bond free

As many as 65% of home owners in South Africa are bond free, and won’t feel as harsh a sting from rising rates, according to research conducted by estate agency, Homebid.

Property economist, Neville Berkowitz, advisor to Homebid, said that over 3.5 million freehold single residential homes, 300,000 sectional title properties and over 120,000 homes in estates are not bonded – and these home owners will be less directly affected as interest rates rise.

The bulk of the 65% home owners who are bond free come from two market segments – government subsides homeowners and empty nesters, Homebid said.

Approximately 24% of the total homes registered in the Deeds Offices are government subsidised housing stock for people earning from R3,500- R15,000 a month, and are included in the 65% of homes that are not bonded.

Homebid estimates that the empty nesters in the age group 50-75 are 25-30% of the residential market.

“They sell their larger homes to move into smaller ones and are invariably cash buyers using the proceeds of the sale of their larger homes,” the group said.

The primary freehold single residential market place represents the biggest percentage of properties not bonded.

This market place comprises 83% of the total 6.1 million homes with the potential of raising mortgage finance. The actual not bonded figure here is 70.5% with only 29.5% bonded.

Of the 6.1 million homes in South Africa, the sectional title market place is 12% or 727,000 homes.

Of these homes 59% are bonded and 41% not bonded, reflecting the role of first time homeowners using this market place as their initial stepping stone to home ownership, the majority requiring mortgage finance.

Homebid researched Deeds Office registrations and obtained further information from the Census 2011, ABSA, Lightstone, and the Centre for Affordable Housing Finance for Africa to compile this research.

“Our research reflects that the majority of South African home owners are not going to be directly financially compromised by the looming increase in interest rates, as two out of three homeowners do not have mortgage bonds on their homes,” Berkowitz said.

However, first time home buyers above R250,000, as well as the second time and subsequent home buyer usually buying a larger home are likely to require mortgage finance.

“The residential marketplaces around South Africa where these specific buyers are active in the single residential, sectional title and estates – usually in the price range of R250,000 to R5 million – will be adversely affected by rising interest rates, as their affordability is reduced,” said Berkowitz.

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Surprising number of SA home owners are bond free