South Africans are giving up their homes – here’s why

 ·28 Oct 2023

New data shows that distressed house sales are on the rise in South Africa, as the majority of sellers are downgrading due to financial pressures.

Lighstone’s latest property report shows that the number of homeowners selling their properties within two years of purchase has jumped from 2% of sales in May 2022 to 3.7% of sales a year later.

Lightstone noted that this was because of the heightened living costs over the past two years, which put many homeowners in a debt trap after the interest rate relief provided during the Covid-19 pandemic.

“The exceptionally low interest rate environment from mid-2020 to end 2021 created an opportunity for new buyers to enter the market or for existing homeowners to buy up – but it also created the possibility of too many buyers overstretching themselves,” the report said.

Recent credit and financial health reports highlight that South Africans are struggling to maintain their standard of living, especially the middle class.

Nedbank’s latest NedFinHealth Monitor shows that 76% of South Africans say their expenses increased in the past 12 months, while 62% say their spending equals or exceeds their income.

69% of South Africans cannot pay all their bills on time, with 33% who said they were homeowners having been late with their home loan repayment in the past 12 months.

Eighty20’s credit stress report highlighted similar concerns, showing those with loans struggle to pay them off – with a 51% increase in the rate of new defaults for home loans.

To illustrate the type of pressures South Africans are facing, South African Reward Association member Kirk Kruger noted that a person with a bond of R1.5 million, a car loan of R300,000, and a personal loan of R50,000 is now paying approximately R5,438 more per month on loan repayments compared to November 2021.

This means this person will need to earn an additional R8,915 per month at a gross level to have the extra R5,438 after tax to sustain their standard of living. That is more than a R106,000 per year.

As a result, Lightstone’s report showed the volume of residential purchases by natural persons halved from May 2022 to May 2023, and only 40% of buyers bonded their properties in May 2023 compared to 60% in 2022.

Alarmingly, having established that volumes and bonds are down, Lightstone also looked at how many buyers were selling properties within two years to measure the level of “distressed sales” and compared May 2022 with May 2023 – and found that 80% more of those who bought in the middle of the low-interest period, May 2021, were sellers by May 2023.

FNB’s latest Property barometer provided further evidence for Lightstone’s findings, highlighting the main reason for selling a home in South Africa was downscaling due to financial pressure. Other reasons included:

  • Downscaling with life stage;
  • Emigrating, upgrading, or relocating;
  • Moving for safety and security reasons;
  • Change in family structure; and
  • Moving to be closer to work or amenities

Read: Trouble for first-time homebuyers in South Africa

Show comments
Subscribe to our daily newsletter