Trouble for homeowners in South Africa – even in complexes and estates

 ·17 Jun 2024

Lightstone Property has warned that the number of negative sales—where houses are sold for less than they were bought for—is on the rise in South Africa.

This was revealed by the data firm’s Property Newsletter for May 2024, which properties are selling for significantly less, especially for those who bought their homes 10 years ago.

During the peak of the global economic crisis, Sales in Execution (SIEs) or foreclosures were widespread, and South Africans were also affected.

In today’s local economy, while SIEs are decreasing, negative sales, where houses are sold for less than their purchase price, are increasing.

A reduction in SIEs is theoretically a positive development. When considered alone, it may indicate a promising outlook for the property market and the overall economic situation.

However, upon closer examination of Lightstone’s SIE trends alongside the decline in property sales in South Africa over the past 24 years, a more worrying picture of distressed sales emerges.

Lightstone highlighted that properties are selling for much less than owners had anticipated. In some cases, they sell for even less than the purchase price.

“When looking at SIEs, negative sales and negative value growth sales in tandem, we see a likely more realistic view of true distress as properties which were bought 10 years ago were unlikely to sell at more than the purchase price, therefore failing to realise the anticipated growth in value,” it said.

Lightstone data suggests that property segments such as lower-value Freehold properties are faring far worse than higher-value properties and estates—although they haven’t been spared.

Additionally, negative sales have been more pronounced in some segments, with sectional titles among the hardest hit.

In 2023, Gauteng experienced the highest number of negative sales, with 9 out of 100 sales being negative.

Mpumalanga and KwaZulu-Natal followed, with approximately 6.5 out of 100 sales being negative.

In contrast, the Western Cape had only five negative sales out of every 100, almost half the rate of negative sales in Gauteng.

“While one might be tempted to rejoice at the decline of foreclosures in the market, the rise in distressed sales clearly points to a property market under pressure,” Lightstone said.

There’s still hope

Despite these findings from Lightstone, Absa’s latest Homeowner’s Sentiment Index for Q1 of 2024 indicates that consumers and investors are increasingly optimistic about the property market’s prospects and anticipate better days ahead.

“While risks remain, sentiment around the property market’s future returns is promising, reflecting what we have known to be true in South Africa for many years—property remains an aspirational and desirable investment,” said Nondumiso Ncapai, Absa Home Loans Managing Executive.


Read: The average rent in every province in South Africa – with one now over R10,000

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