{"id":709150,"date":"2023-08-04T17:00:00","date_gmt":"2023-08-04T15:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=709150"},"modified":"2023-08-04T16:37:58","modified_gmt":"2023-08-04T14:37:58","slug":"homeowners-in-south-africa-are-getting-crushed","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/property\/709150\/homeowners-in-south-africa-are-getting-crushed\/","title":{"rendered":"Homeowners in South Africa are getting crushed"},"content":{"rendered":"\n

Rising interest rates, increased power costs, higher living costs and a weakening currency combined to put consumers \u2013 and homeowners \u2013 under immense pressure over the past 19 months, which will likely continue in the near term.<\/p>\n\n\n\n

In the first half of 2023, there have been reports from estate agents indicating a decrease in sales and buyer inquiries, along with a rise in properties being listed for sale.<\/p>\n\n\n\n

According to property economists, the property market’s prices and activity were negatively impacted during the second quarter of 2023 due to interest rate hikes. Credit reports also showed that South Africa experienced an increase in defaults and overdue balances on a quarter-on-quarter basis, the first time since the Covid-19 pandemic.<\/p>\n\n\n\n

The picture being painted is one of increasingly tough conditions for homeowners in South Africa.<\/p>\n\n\n\n

Property analysts at Lightstone suggest that house prices will fall by 12% from \u201cpeak to trough\u201d by the end of 2024, and there is little hope for a strong recovery as \u201cbuyers will continue to face higher real costs of borrowing for the foreseeable future,” it said.<\/p>\n\n\n\n

The graph below shows how the repo rate has been rising in recent months – with the full impact of 14-year highs yet to be felt. <\/p>\n\n\n

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Millions more spent to service bond repayments <\/strong><\/p>\n\n\n\n

A notable effect of these quickened interest rate hikes is the fact that many South Africans have had to pay considerably more to service their bonds.<\/p>\n\n\n\n

Lightstone\u2019s analysis points out that 155,000 homeowners who bought and bonded properties in 2021 are now collectively paying over R600 million or 40% more per month to service their instalments.<\/strong><\/p>\n\n\n\n

The data further shows the spread of these increases based on property values, which the table below shows.<\/p>\n\n\n\n

Property value<\/th>Total additional instalment value<\/th><\/tr><\/thead>
Under R500,000<\/td>R8 311 687<\/td><\/tr>
R500,000 to R1 million<\/td>R103 785 195<\/td><\/tr>
R1 million to R1.5 million<\/td>R107 263 492<\/td><\/tr>
R1.5 million to R2 million<\/td>R97 487 937<\/td><\/tr>
R2 million to R3 million<\/td>R127 819 562<\/td><\/tr>
Above R3 million<\/td>R155 792 858<\/td><\/tr>
Total <\/strong><\/td>R600 460 731<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n

Of the 155,000 bonds issued in 2021, 46% were to first-time buyers (FTBs), 64% of which account for lower-value properties, while only 17% were for properties in excess of R3 million, noted Lightstone.<\/p>\n\n\n\n

The data also shows that affordability in the current market had pushed prospective buyers towards smaller apartments rather than the more expensive stand-alone houses. However, this didn’t save them from crippling interest rate hikes.<\/p>\n\n\n\n

“Sectional schemes account for 27% of the increased instalments, and there are developments that will be at risk if affordability leads to defaults,” said Lightstone.<\/p>\n\n\n\n

“New developments are more affected as they have a greater proportion of bonded sales which took place when interest rates were low,” it added. <\/p>\n\n\n\n

The data noted there are 16 schemes where more than 50% of the development\u2019s units were bonded in 2021. This covers 2,000 bonds which translates into increased monthly instalments of R4.5 million.<\/strong><\/p>\n\n\n\n

Examples of these that also show the pressure being faced by homeowners include:<\/p>\n\n\n\n