 While South Africans dream of owning their own home, other nations consider renting the cultural norm. In Germany, for example, even middle-class and wealthy households often choose to rent their homes for life.
This makes sense for them, because of high-quality rental stock, strong tenant protection, and different market structures. “But in South Africa you really shouldn’t be renting your home, unless there’s a strategic reason behind it,” says Renier Kriek, MD of innovative home loan provider, Sentinel Homes. “Renting tends to be a trap in the SA economy, because you can’t afford not to have exposure to large capital assets such as residential property.” Aspirations vs reality In South Africa, renting typically isn’t a lifestyle choice but an affordability or creditworthiness issue. The 2025 Ipsos Housing Monitor found that 89% of renters in this country would like to own their own home. And 92% of South Africans believe everyone has a right to own their own home, but nearly half struggle with housing costs. Lack of affordable housing is enforcing a long-term renting cycle – trapping renters because they can’t afford to buy a home, even when their monthly rent is higher than potential bond repayments. Stats SA’s 2024 General Household Survey recorded a drop in homeownership (from 64.4% in 2022 to 60.1% in 2024) and an increase in households who rent (from 22.5% in 2022 to 25.1% in 2024). The rental trap affects everyone “For the past 70 years, property prices have outpaced wage increases,” says Kriek. “This is not only a South African phenomenon, but here it has the effect that 80% of South African households are already effectively priced out of the property market. Our housing backlog is around three million formal units.” He quotes French economist Thomas Piketty, who says that if the real return on capital is higher than the GDP growth, then those with capital will become richer at a faster rate than those who only rely on wages. In short, capital ownership deepens inequality, effectively locking South Africa’s renters out of wealth-building opportunities that their property owning counterparts have purely because of having a large capital asset with the benefit of leverage. How to escape the trap? Renters should explore all possible options to buy property, says Kriek. Start saving early, don’t overspend on rent. Putting down a larger deposit improves your home loan eligibility, as the instalments must stay within 30% to 35% of your gross income. “Let’s say, this qualifies you for a R1 million home loan,” says Kriek. “But if you have saved a R200,000 deposit, you can buy a R1.2 million house.” This should also reduce your interest rate, saving you money and increasing your return on the property value. Strategies to boost your deposit A first-time buyer earning R3,500 to R22,000 per month may fit the criteria for the First Home Finance (FHF) Subsidy, formerly FLISP. “It’s a brilliant government scheme that contributes towards buying or building your first home,” says Kriek. “Certain bond originators assist in securing the FHF, which would be the most frictionless way.” Many employers also offer housing subsidies, sometimes combined with favourable loan terms, deposit assistance, or matched subsidies to qualifying employees. Use any and all of these opportunies for support, if you can. Making homeownership more affordable Kriek suggests co-buying: getting a partner (not necessarily your romantic partner) to purchase a residential property together. Or enhance affordability by buying a “fixer-upper” house. He says, “You generally get a larger uptick in value for making the renovations than buying an already renovated property. However, you’ll need cash as home loans don’t cover renovation costs.” Another option is buying a house with an income-generating flatlet or garden cottage to be rented out. The bond originator can include 60% to 70% of the projected rental income in the loan affordability calculation, to help secure the loan. And the rental income earned goes toward paying down the finance, saving on interest. You could also subdivide. “Many municipalities recently started to allow the building of more than one house on a single residental erf,” says Kriek. “So, if you buy an older property with a large backyard, you can sell the developable part of it, or the right to build there, to someone else., even if you can’t raise the money to build the second or third dwelling yourself.” Crunching the numbers “Escaping the rental trap doesn't necessarily require you to own the house you live in,” says Kriek. “Sometimes, this means buying properties that you don't live in, or buying several smaller properties instead of one expensive one.” For example, at the higher end of the market, rentals are generally cheaper than the interest on the bond. Here, you might be better served renting and – rather than purchasing the house you live in – buying a less expensive property with a better investment case. “Or instead of buying one house for, let’s say, R3 million, you could invest in three duplexes for R1 million each, in different areas, all earning income. This would spread your risk for the same value and provide more diversification benefit,” says Kriek. “The basic lesson is that if you're investing in residential property to break free from the rental trap, your decision must be purely financial, not emotional.” ENDS
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 Frequent short-term borrowing could be a black mark against you when applying for a home loan.
“The number of short-term loans you burn through may warn banks or other lenders that you’re having trouble managing your finances,” says Renier Kriek, Managing Director at disruptive home finance business, Sentinel Homes. That can make them reluctant to fund your dream of owning your own property. Easy debt While all debt should be managed responsibly to maintain a good credit score, for many South Africans, short-term loans are becoming an addictive way to make ends meet. Or, to fund luxuries they can’t afford but refuse to live without. It’s tantalisingly easy to get hooked as well - you don’t need to put up collateral to get one and you don’t have to explain what you’ll use the money for. Also, some like to think that if they fall behind on their repayments, they can simply submit themselves to a debt review. Introduced by the National Credit Act, a debt review is a legal process for someone who is over-indebted to settle with their creditors by paying what they can afford. A registered debt counsellor will review their finances and help them create a repayment plan. The hidden costs Unfortunately, there’s no such thing as a free lunch. Short-term loans can carry much higher interest rates than other types of debt - up to 5% per month, which is around 6 times the current prime rate. “So, the more you borrow, the worse off you become financially and the more likely you are to default,” says Kriek. That debt review “solution” you are being offered isn’t necessarily a safe bet either - because it will cut you off from any further credit provision for as long as it takes to remedy your past bad behaviour. Even if you’re not a repeat offender, firms offering debt counselling will often assure you that your debts will be forgiven, the slate is wiped clean and all will be forgiven. “In the real world, lenders could deny your home loan application simply because you needed debt review in the first place,” says Kriek. Alarm bells Short-term or unsecured loans are not an evil to be avoided entirely. They’re actually good for the economy when used responsibly. However, they’re also a red flag to home loan providers when they feature strongly in your financial history, even if you’re keeping up with repayments. Credit providers use various risk models to identify patterns in our spending behaviour - good and bad. They know what financially responsible and irresponsible spending patterns look like. “Frequent short-term loans - with or without defaulting - are a risky pattern that implies an individual does not manage debt well, and that is something a home loan provider does not want to make a long-term investment in,” says Kriek. “The ability to delay gratification is the underlying attribute that responsible users of credit have, but there is no easy way to quantify whether a particular applicant possesses that trait – the number, frequency and type of unsecured credit transactions is a useful proxy in that regard.” Good debt So, what is the right course of action, especially if you already have short-term loans? First, understand that short-term loans have their place but are seldom necessary. Stop using them and make a plan to pay off the ones you already have. Then get to work on building an emergency fund of cash that can only be touched for true emergencies, so that you will not need unsecured debt in those cases. Second, work on saving for luxuries such as holidays and large capital purchases. You will be paying monthly anyway, whether you take the credit or save, but in the saving scenario interest will be working in your favour rather than against you. Delaying the gratification of that large purchase is difficult, but no-one said adulting would be easy. Finally, if there is no other option, opt for “good” debt as far as possible. Buy your clothes, furniture, appliances, groceries and other items using store credit if you absolutely cannot do without. You don’t have to buy things you don’t need to build a good credit score. Everyday items and normal household purchases are fine. “Credit providers’ risk algorithms generally look favorably on consumers who start their credit journey with store debt because it fits the pattern of responsible spending, provided you pay your accounts on time, of course, and do not spend near or above your credit limit,” says Kriek. Long-term planning Eventually, most people end up before a home loan provider in the hope of buying a house they love. But lenders are profit makers and risk reducers, so it’s important to think like they do. Are you a good investment? Will you repay your home loan on time and in full? The lender’s modern analytical systems - often powered now by artificial intelligence - evolved to answer questions like these and exist to protect their owner from risk. “Short-term loans that literally fund your lifestyle can easily sway the algorithm against you,” says Kriek, “especially if you are funding luxuries or nice-to-haves from easy debt rather than developing the discipline of saving.” ENDS  Nothing is certain except death and taxes, the saying goes. Property owners must plan for both if they want their home and other assets to pass smoothly to those surviving them.
“Structuring your estate smartly, or at least having a will in place, will spare those grieving your passing further hardship, both emotional and financial,” says Renier Kriek, Managing Director at Sentinel Homes. Any decision a property holder makes in this regard should be guided by advice from a professionally qualified financial and estate advisor. However, Kriek offers a good overview. Basic factors When planning for death, property owners need to consider two main factors. The first is how to structure their estate so they don’t directly own anything when they die. This is usually only appropriate for those with large estates and minor dependents, or businesspeople who risk having their assets attached to repay creditors, but may not be the best tax planning advice for most consumers. The second concern is their marital status. Are they single, married in community of property, or married out of community of property either with or without accrual? “Each marriage model will affect the distribution of an estate differently,” says Kriek. Make a will Without a will, intestate rules apply to the deceased estate, as prescribed by the Intestate Succession Act 81 of 1987. These rules determine which surviving relatives will inherit what portion of the estate, from the surviving spouse and descendents down to distant blood relatives. The Act’s complex requirements could result in, for example, a spouse losing their family home to ensure they and each child receives an equal inheritance. So, for anyone having assets such as homes or other fixed property and especially those property owners who have dependents, it is always best to have a will professionally drawn up to make sure assets will be distributed in a manner desired by the property owner. “Again, the marriage model will affect how the will should be structured,” says Kriek. “Estate planning with a licensed and regulated professional is also likely to include investments and insurance, proper planning of which remain essential.” Leverage trusts and companies The beginning of the article mentioned not owning property at death, which is a desired outcome for some consumers due to tax, risk or other reasons. Avoiding direct property ownership while still enjoying the benefit of owning property can be accomplished through the use of a trust or company. However, the cost of these vehicles makes them best suited to more affluent people who have larger estates and minor dependents, or entrepreneurs. If property is transferred to or bought through one of these entities, the entity owns the asset. So, dying is of no consequence, if one’s dependents are the ultimate beneficial owners of the entity, such as through being beneficiaries of a trust. The property held by a trust or company rather than in a person’s own name will not be subject to estate tax or capital gains tax at death, and typically cannot be attached by the deceased’s creditors. Only income that is earned through that property is taxed at a rate prescribed for the specific type of entity in addition to capital gains tax if the entity elects to sell the property concerned. “Which structure is best suited to an individual’s needs must be determined with the help of a trusted estate planner or financial manager,” says Kriek. “Do not assume that the more complicated structure, using entities such as trusts and companies, is the “better” and therefore most appropriate one.” Address affordability Unfortunately, structuring cannot save a property that surviving family members are unable to afford, whether it is bond repayments, rates or levies, trust administration fees, corporate accounting fees, or other expenses. This could happen if a surviving spouse does not work and cannot raise the required finances to settle existing debt against the family home or other property. An estate might be able to cover its own costs, for example, where income is derived from rental properties or the entity receives cash bequests from the deceased person. Otherwise, a will, trust or company should be backed by some form of insurance that ensures funds are available after the owner’s death. “By following this rough guide and using a properly qualified and licensed financial planner, you will allow your loved ones to continue enjoying the life you worked so hard to provide them with,” says Kriek. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  Competing precedents, including a recent court case involving a home buyer who got cold feet, wanted to walk away from the deal but couldn’t, have sparked discussions in South Africa’s property law circles. The judge ruled in favor of the seller, because both parties had signed a contract that became binding as soon as the buyer’s credit provider issued its “approval in principle”.
“Some people misinterpreted the ruling, or disagree with it - saying it wasn’t fair,” says Renier Kriek, MD of Sentinel Homes. Yet the judgement followed centuries of contract law precedent by focusing only on the following question: At what stage did the purchase agreement become binding, before or after the property finance had been accepted by the buyer? “Obtaining finance is a process, unlike a turning on a light switch, it’s not instant and even positive results arrive piecemeal,” says Kriek. “When you sign an offer to purchase a property and require a home loan, there’s usually a condition that your loan must be approved before a certain date. This is called “suspensive condition” – meaning that only once this condition is fulfilled, the contract will become final and binding. “Buyers and sellers need to understand the suspensive condition in their contract, especially as they generally have competing interests in terms of what stage the deal should become final,” he says. “It’s therefore important to phrase your contract without ambiguity, so it’s not open to misinterpretation.” Real-life consequences Contract law may sound academic, but it has serious, real-life consequences. Since nobody wants to lose their deposit, Kriek urges buyers to fully grasp the financing process: When a home loan provider assesses your application to buy a house, and is satisfied lending you the money, it will first issue an approval in principle (AIP). Then it conducts a valuation, before eventually issuing a prescribed document called pre-agreement statement and quotation. According to the NCA, the buyer has five days to accept the pre-agreement statement and quotation, which then becomes a final offer of finance. “From the seller’s perspective, it would be best if the agreement of sale would likely contain a clause stating that the contract becomes binding as soon as the home loan provider issues the AIP,” says Kriek. “From the buyer’s perspective, however, this clause poses a risk: it means you’re bound to the sales agreement, the sale is final, and your deposit could be on the line, even before you have agreed to the interest rate and other finance conditions suggested by the home loan provider.” Ideally, he advises buyers to ensure the sale is only binding once: a) the bank has issued the pre-agreement statement and quotation, and b) you have accepted it. “This means you can only lose your deposit or be forced to buy the property once you have agreed to the terms of the credit proposed to you.” Check the nitty-gritty Also watch out for home loan approvals that require the submission of approved building plans. As a rule, your offer to purchase should require the seller to do so. But if this clause is missing, the seller won’t be obliged to provide the building plans, even if your home loan provider requires these. This makes you as the buyer responsible for obtaining the plans. It’s not only time-consuming but if plans can’t be approved, due to unauthorised building works, your deposit may once again be at risk. This also applies to any other conditions your home loan provider may have. You have to ensure that these conditions are also in the sale agreement, so that the two documents tie into each other. For these reasons, Kriek urges buyers to get legal advice before signing their offer to purchase. Don’t rely only on the property practitioner or others linked to the seller No-one should take a high cost and high liability decision like buying a home without expert legal and other professional advice, such as from a registered property practitioner and bond originator. Ultimately, understanding the nitty-gritty of your contract should help you avoid financial losses and enjoy a smoother property transfer. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  South Africa has a housing supply backlog of at least 2.2 million units, with a significant shortage in the affordable housing or “gap market”, according to a recent study by the Centre for Affordable Housing Finance (CAHF).
The gap housing market is generally considered to be households earning too much to qualify for Reconstruction and Development Programme (RDP) housing but too little to obtain traditional bank-financed homes in the open market. Renier Kriek, MD at Sentinel Homes, says 40% of consumers fall into the RDP housing category (household incomes below R3 500 per month) and the wealthiest 30% of households are well-served by the open housing market. Massive demand The gap market is the middle 30% of consumers where the supply of housing stock is extremely low and even declining despite massive demand. Kriek argues that a market design error is to blame for this high demand going unmet. Adverse market design disincentivises the holders of capital to invest in affordable housing. The biggest hurdle relates to the unnecessary prolix, cumbersome, and expensive processes that are associated with evictions and foreclosures. The cost of resetting the transaction (evict or foreclose) is prohibitive in South Africa and does not match market circumstances. South Africa should adjust their regulatory environment to favour private sector investment and the expansion of supply. “We need to reduce the transaction cost for the holders of capital to take their chances on consumers who are not acceptable risks in the unduly high tenure security environment. In this way, some people will move into the formal housing market and fall out again, and perhaps more than once in their lifetime. If we go through enough of these cycles eventually everyone will be housed.” Kriek admits that this solution may sound slightly callous and counterintuitive to the casual listener. “The alternative, retaining our restrictive policy environment, is even more callous and is currently barring people from ever getting the opportunity to enter the formal housing market. What use is being born free if you will never realise that constitutionally mandated right of access to adequate housing?” Unintended consequences Another prevalent and reasonably fixable market design problem relates to government subsidies. The Department of Human Settlements has been offering the First Home Finance (FHF) subsidy, previously called FliSP to households in the gap housing market. It aims to subsidize affordable first-time home-ownership opportunities for households with income from R3 501 up to R22 000 per month. It is an inverse means-tested subsidy, meaning that the cash grant is lower the higher the household income becomes. “Millions of rands earmarked for this subsidy have remained unclaimed in the past and continue to remain unclaimed. This is not because people do not know about the incentive or do not desire it. The first challenge is the relative scarcity of gap housing stock, which is driven by poor demand due to incentives that are adverse to the deployment of capital in this segment, whether by landlords or home loan providers.” Kriek argues that the subsidy design has unintended consequences resulting in market participants, such as estate agents, being unwilling to sell to subsidy recipients. “Due to overzealous fraud prevention measures and perhaps also an unwillingness to integrate into the existing market infrastructure, government has traditionally insisted that the registered title deed contains the name of the subsidy recipient before they release the subsidy amount.” This means that the subsidy portion is usually received months after the transfer, unlike all other funds in a property transaction which are secured by third party payment functionaries such as banks or attorneys. This makes each property transfer involving a subsidy inordinately complex, and everyone involved prefers doing the same transaction with a consumer who does not rely on a subsidy. Usually, it’s the estate agent waiting for the subsidy payment to receive their commission, and that is simply an unacceptable adverse incentive if government’s intention is to have the subsidy reach its intended recipients.” Though recent developments seem to favour fixing the market design shortcomings of FHF, the administration of the subsidy remains positively byzantine. There is a national subsidy authority, that can approve and pay subsidies, and a separate subsidy authority for each of the provinces, each with a unique set of rules and procedures and a separate application procedure. This is a quagmire for lower income consumers to navigate successfully, especially where those who rely on subsidies are already viewed negatively by market intermediaries such as estate agents and transferring attorneys. It will take significant political capital to implement market design solutions that can solve the problems facing the gap housing market. If we do nothing it may even get worse, says Kriek, who fears that the current government may not have the ability to adequately diagnose the problem, and much less the political will to affect the necessary policy and regulatory changes. However, if it could succeed, the job creation that could follow finding solutions to the problem of housing supply could go a long way toward achieving the job creation efforts of government recently articulated in the President’s State of the Nation address to parliament. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za  The local property market will see a resurgence in 2024 predicts Renier Kriek, Managing Director at Sentinel Homes.
"People have been held back from buying and selling property by various factors since before the COVID lockdown, but that is about to change for the better," he says. Factors impacting the local property market In South Africa, property buying and selling have dropped steadily since 2021. In 2023, market volume was about 5% lower than 2019. The factors driving this decline include load shedding, the national logistical backlog, a stalling economy, runaway inflation, the rising cost of living, and a 475 basis point increase in the lending rate since the COVID lockdown ended. However, people's life circumstances continue to change, suggesting pent up demand building below the surface. The number of first time buyers – a solid indicator of market demand – has also decreased significantly, again implying that unsatisfied demand exists. Outlook for 2024 Two main events signal that things are about to change. First, economists agree that, as inflation slows in South Africa, SARB will likely reduce the interest rate at its May or July National Planning Commission meeting in line with the US Fed. Second, the country will hold general elections this year, and probably be led for the first time by a coalition government at national level. While this might concern South Africans, it also promises to bring new energy to solving the nation's dilemmas. Kriek believes both these events will turn out well and will provide a release for the evident demand for property. "Then, we'll see a dramatic increase in market activity," he says. Several lesser trends are also worth watching. Smart money in the market Right now, there's a lot of smart money in the market – entities that buy properties to boost their portfolios, not their lifestyle. Interest rates on mortgage loans have decreased significantly, partly because banks are competing for a shrinking market, but also because these investors are richer, have better credit records and present a much lower risk than the average buyer. They are also paying higher deposits up to 105 percent. In the same vein, wealthy buyers from abroad are snapping up luxury properties in Cape Town above R20 million. This trend is sure to continue into 2024 as that smart money looks to acquire more assets before the market turns. Semigration Semigration remains a major trend in 2024 and smaller towns will continue to be targeted for gentrification, no longer only in the popular Western Cape but across the country. As more affluent buyers seek stock in these locations, incumbents will see their property value rocket. This may not be the only incentive for them to sell, though. Increases in rates and the cost of living may become unaffordable for them, pressuring them to move elsewhere. But where will they go? With more than 80 percent of all building plan approvals being in coastal areas currently, the answer is plain to see. Co-buying There is a marked increase in co-buying, that is, people buying a property together with someone other than their spouse. This includes friends, unmarried couples, investors and those with business intentions. About one in every four properties purchased is now co-bought. This approach overcomes the gap between property prices and income, and is a way for younger people to enter the market while spreading risk between them. Banks have also changed their policies to accommodate co-buying, with some allowing up to 12 individuals to join in the application. Buy-to-let boom The buy-to-let market is booming, especially in the Western Cape. One reason is that, due to insufficient stock and higher property prices at the coast, many semigrants rent while they shop around for an affordable property or while their new home is being built. This growing demand provides a good incentive for buy-to-let landlords to invest in new homes and apartments, despite the high construction costs. Almost 11% of all bond applications are currently investment purchases. Smaller properties Another continuing trend in 2024 will be smaller plots and smaller properties. High construction costs make it very difficult to create new stock that competes with existing stock in the market. So, both tenants and buyers will have to adapt to reduced living space unless they can afford to build their own at a premium. Relief for homeowners The number of buyers may be low but owners are also holding onto their properties for dear life, in the face of crippling interest rates. Unfortunately, foreclosure may have forced some to sell. Yet, the predicted drop in interest rates promises relief to those who managed to stay afloat. It could also mean an influx of buyers for anyone who desperately wants to unburden themselves of their property. When will the change happen? Kriek expects the dam to break in the coming winter. This is not a prime time for property sales, however, especially in the Western Cape. During this season, people tend to buy fewer properties or buy them at a reduced rate. "With lower transaction volumes during the winter months, there is likely to be a slight buyer's market that will turn to a seller's market in spring," he says. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  Everyone buying a home would like to know that they are getting good value for money. Buying a property that is good value for money is not easy but is achievable for those who are astute and are willing to be patient and remove as much emotion from the decision as possible.
The first important mindset shift is that buyers must not confuse value with price. “Just because you were able to negotiate a reduction in the asking price does not make it a bargain. The price likely was inflated to begin with, because there are many incentives favouring higher listing prices,” says Renier Kriek, Managing Director of Sentinel Homes. True bargains have some distinguishing characteristics to look out for. This includes:
Home seekers on the lookout for a bargain must remain alive to illegal construction. “The risk associated with illegal building work is almost always not worth the discount on the price,” says Kriek. If there are any doubts about the structural integrity of a building, call in the professionals to do an inspection. The benefit of a qualified home inspector, especially to inexperienced buyers, cannot be overstated. Since kitchens and bathrooms are the most expensive parts of any residential properties carefully consider the conditions of these two areas. More sage advice from Kriek is to avoid bargains close to open public spaces. These areas tend to devalue property if they are not well maintained by local authorities. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes If you do not want to receive emails from us, please use the link: Click here to unsubscribe. |
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