 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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 Two Cape Town apartments recently went viral for their overpriced monthly rent. A modest apartment in Green Point was going for R22,000 while another small unit in Durbanville was advertised at R16,000, despite needing repairs and having an ‘ugly kitchen’ with broken appliances. Social media users criticised the price-quality mismatch, noting that similar or better homes in Joburg cost far less.
Affordability concerns like these are a key reason why tenants are relocating from the Western Cape, according to nearly 80% of rental agents in PayProp’s 2025 State of the Rental Industry report. “Even more concerning, the vast majority of South African households (80%) are priced out of the formal housing market because their monthly income is under R26,000,” says Renier Kriek, MD of innovative home finance business Sentinel Homes. “We have an undersupply of about three million formal housing units.” Living in Cape Town is particularly pricey, with average property sale prices increasing from R1.6 million in 2020 to R2.1 million in 2025. In contrast, Johannesburg’s prices have remained relatively flat over this period, staying on average between R1 million and R1.5 million, according to property analytics firm Lightstone. Soaring rent “Obviously the higher capital values mean that people who buy for investment require a higher nominal return, which means the rents go up,” says Kriek. This has been happening in the Western Cape, where the PayProp Rental Index shows 9.6% year-on-year rental growth and average monthly rents reaching R11,285 in Q1/2025 – significantly higher than Gauteng (R9201), KwaZulu-Natal (R9170) and the Eastern Cape (R7330). Rent control Calls for rent control in Cape Town are getting louder. The idea is to cap rent increases to make housing more affordable. However, this may win populist votes and provide short-term relief for tenants, but won’t fix the housing shortfall, says Kriek, pointing to unsuccessful rent control in cities like New York, Berlin, Stockholm or Tokyo. While rent control impacts the entire property market, it ironically hits hardest in the low-income band – those who should benefit the most. “Rent control leads to underinvestment and poorly maintained units as landlords have limited incentives to maintain or expand their rental stocks because their profits are capped,” says Kriek. Another problem is misallocation, where some tenants will stay in rent-controlled units even when these no longer match their needs. By blocking the units for people who genuinely need them, they create an inefficient housing distribution that worsens the undersupply further. “Rent control is the most efficient technique currently known to destroy a city - short of bombing.” Making small units profitable There’s ample private sector money available to invest in rental housing, says Kriek but government needs to change the market design that makes this segment unprofitable. Small units are more expensive per square metre to build – and sell – than larger ones. In addition, he says, tenants in affordable units (sub-R7000 rent/month) are more frequently in rent arrears than higher-income tenants as they feel economic pressure harder. The number of ‘squatting’ tenants (who haven’t paid rent for three consecutive months and are still occupying the property in the fourth month) is also increasing: the TPN Squat Index rose from 3.48% in Q4/2023 to 3.71% in Q2/2024. Legal protection of landlords The balance of power is unduly tipped against landlords and needs to be levelled, says Kriek. “The law that governs evictions, the Prevention of Illegal Eviction and Unlawful Occupation of Land Act (PAI), isn’t fit for purpose. It was designed to evict land squatters but due to poor drafting it also applies to the eviction of tenants who don’t pay their rent or refuse to move out when legally required.” This makes the process unnecessarily expensive, time-consuming and open to exploitation. “Historically, eviction is sensitive topic in SA,” concludes Kriek. “But if we don’t allow strict enforcement of payment obligations, then landlords won’t invest in rental housing, which is the easiest and the quickest way, using the least amount of government resources, to fix our housing undersupply.” ENDS  In its June 2025 Property Newsletter, automotive and property data provider Lightstone reports that only one formal house exists per 3.3 families who earn less than R26,000 per month. This accounts for more than 80% of South African households. The overwhelming majority of South African households are currently priced out of the South African property market, and this trend is worsening.
“There’s something very wrong if such a large demand is not being met and, although the problem is well known in the property industry, no real solutions are forthcoming from the government actors who are responsible for solving these problems,” says Renier Kriek, Managing Director of innovative home finance provider, Sentinel Homes. He says the root causes are mainly systemic and need to be addressed by the government. It is simply not acceptable that since 2000 we have added 19.3 million inhabitants in SA but our economy has managed to produce only 1.9 million homes. Where we are Not only are there not enough houses but new developments are victim to rising construction costs, making each generation of property less affordable to consumers than previously. In fact, property prices have been outpacing wage increases for the past 70 years, not only in SA but in most of the world. Add to this trend South Africa’s flaccid economic growth resulting in low job creation and low wage growth, and it’s easy to see why affording a home is becoming harder and harder for low to middle earners. National changes Certain things need to change outside the property market before problems can be tackled from within, says Kriek.
“Making such changes at a national level will ensure that problems in the property market are not intractable,” says Kriek. “But these necessary reforms will also go a long way toward rejigging the economy generally for the better.” Property market changes Inside the property market, several problems are making housing construction more costly and therefore less affordable when properties are sold.
Opening the door to housing that’s affordable If 80% of South Africans cannot afford a home, and developers are unwilling to meet the demand, something is terribly wrong. It’s not an innovation or economical problem but a systemic one that the government needs to rectify. The problem is market design, and that is something for which we rely on government, and for which the political will must exist to take some tough decisions. “The private sector is profit driven and the demand clearly exists, so it’s up to the government to create the incentives and ease the restrictions that prevents the private sector from earning their bread in the provision of affordable housing,” says Kriek. “There’s more than enough money floating around – government just needs to create a market that provides incentives for the available resources to flow to where the demand already exists.”  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  Recently, the South African Reserve Bank reduced the repo rate by 25 basis points but the real interest rate remains far too high to spur meaningful capital investment by South Africa’s private sector. While the news brings some welcome relief to property owners, it’s another disappointment for the country’s real economy.
This is according to Renier Kriek, Managing Director at Sentinel Homes. “The SARB has consistently preached that their policy bible contains only one chapter, titled ‘inflation targeting’, which requires sticking to within their 3–6% inflation target band and anchoring inflation expectations at the 4.5% midpoint,” he says. “Their messaging has consistently and unfailingly pledged that their mandate is the only consideration that guides their decisions.” False policy Yet, inflation has remained low over an extended period, currently sitting at 2.8%, leaving the opportunity for a softening of monetary policy wide open. Why then has the SARB stubbornly refused to reduce the interest rate accordingly, even as inflation hovers at or below the bottom of their target band? Despite preaching vague and opaque ‘risks to the upside’ to justify their hawkishness in recent years, it’s clear that the SARB has been disingenuous – in short, they have been lying to us. That was made plain for the first time today, but it has long been evident there is a secret driver of their decisions. “It was clear with the announcement that the SARB’s policy bible has contained a new chapter, which is their anticipated future mandate, and they have already been guided by that expanded gospel, despite the existence of the chapter having been secret and further despite the content of the chapter not having been agreed to with Treasury and other stakeholders,” says Kriek. Why now? The argument advanced by the Monetary Policy Committee, by way of Governor Kganyago’s statement and answers to questions during the press conference, is that the MPC wishes to deal a decisive blow to inflation in the long term, transforming the SA economy to a low(er) inflation economy. This will also mean lower interest rates for longer in future, per the MPC’s reasoning, since lower inflation economies generally tend to have lower inflation rates. “However, the question is why do we want to do this now?” says Kriek. “Moving to a lower inflation target will likely have long-term positive consequences for the SA economy, but it will also involve near-dated discomfort. Essentially, the MPC is promising short-term pain for long-term gain.” “The SA economy is a very frail patient at the moment and keeping interest rates at current high levels in order to achieve longer-term outcomes is a risky gambit. We should at least be asking, and this is as much about political calculation as economic policy, whether we should not attempt monetary stimulus first, getting the economy out of its bandages, and attempt the MPC’s incisive reforms once the patient is back on its feet.” Impact of delinquency The property sector has shown signs of broad-based recovery, with price lines across all the metros trending upwards in Stats SA’s latest Residential Property Price Index. The cumulative 75 bps cuts, with a further cut at today’s meeting, have already had the effect of bringing previously pent-up demand spilling into the residential property market. However, while these are green shoots, the market is still under significant strain. According to National Credit Regulator statistics, home loan delinquency is up 35% in the last 3 years, signifying the tremendous pressure households are experiencing related to their finances. “This sharp increase in delinquency will come home to roost soon, as a sudden influx of distressed stock in the market is likely to drive prices down in the face of relatively tepid demand,” says Kriek. A small window of opportunity Households seeking to enter the market should not delay any further. The MPC found that a neutral policy should be 25 bps lower than the new repo rate of 7.25%, meaning we can expect at least one more cut in the near future. So, it is more likely than not that the upwards momentum evidenced by the aforementioned green shoots will be sustained and expanded as the market adjusts to lower rates. The decision at the next meeting will be led by the MPC’s insistence on pre-emptive management of monetary policy through its anticipated new mandate, and so the CPI inflation reports from now until the next meeting in July 2025 will have to be watched closely. “It seems that if inflation inches higher even slightly, the MPC’s overly hawkish instincts will rule decision-making at the next meeting, favouring keeping rates steady despite low employment and flaccid economic growth,” says Kriek. ENDS  The significant decline in the number of people who can keep their mortgage accounts up to date clearly illustrates the level of financial distress consumers are currently experiencing.
Historically around 92% of all mortgage accounts were up to date, but it has been dropping quite dramatically in recent times. The latest available figure shows it is down to 88% in the last quarter of 2023. That means home loan accounts with arrears have increased by about 50% recently, and it happened in the relatively short time span of 18 months to December 2023. Globally inflation has been quite stubborn and interest rates remain high as a result. In South Africa the repurchase rate (repo rate) of the South African Reserve Bank reached its highest level in 15 years, says Renier Kriek, managing director of Sentinel Homes. This means the prime rate, used to price home loans and other consumer debt like car loans and credit cards, is elevated. High inflation, and the high interest rate response, has been caused by a confluence of factors including the hangover from previous quantitative easing, supply-chain bottlenecks during the Covid-19 pandemic, the Russia-Ukraine war and the recent conflict in the Middle East. Despite earlier predictions that the high interest rate cycle could turn around in May this year it is now only expected next year due to high inflation proving stickier than anticipated. “Being unable to afford your home loan instalment is not a position anyone wants to find themselves in. Steer your own boat rather than leaving it to the vagaries of the foreclosure process. Not taking control of the situation can be financially disastrous,” advises Kriek. Prevention better than cure He urges homeowners to come to an agreement with their home loan credit provider before they miss the first payment. Stick to the arrangement. Do not over-promise and under-deliver. “If you couldn’t make an arrangement in advance of missing a payment, and you’ve already fallen into arrears, pay something toward the debt immediately. Just pay anything you can and keep on doing that as a launchpad for negotiations with your home financier.” Accounts that are receiving payments are less likely to face hand-over and foreclosure than accounts receiving no payments. “Do not let unreasonable hope be the enemy of your future financial well-being,” he adds. If the cause of your financial distress is unlikely abate within a reasonable time, call it a day and list the property for sale with an estate agent. Be realistic and pro-active. He recommends that distressed homeowners market their property before the home financier’s attorneys come knocking, ensuring a better return on the sale. “You will also avoid a slew of additional costs once the bank starts with the foreclosure process. These only serve to make your poorer, adding insult to injury.” Some people, particularly men in Kriek’s experience, tend to be too proud to discuss financial matters with family and friends. Many families are caught by surprise when there is suddenly talk about foreclosure, having missed the opportunity to assist along the road. “Reach out to the people you love and trust, there may be a lifeline from someone who will understand your circumstances and can assess the situation with much higher fidelity than a remote credit provider.” Forbearance before foreclosure Credit providers may be willing to assist a distressed homeowner by offering a payment holiday or by granting an interest-only period. It may also be possible to spread any existing arrears over a few months ‘repayments or extending the term of loan. This is especially true when the bar to payment is temporary, such as hospitalization or sudden retrenchment It is also important for consumers not to fall prey to over-enthusiastic debt counsellors. Many unscrupulous operators in that industry market debt counselling as a cure for all debt related ills. Entering debt counselling may not, in fact, save your home, but may still have a potentially disastrous effect on your future finances. For instance, debt review stops you from taking any new debt for several years while the debt review is completed. Kriek says there is a general misconception that home loans are “money-spinners” for home loan companies such as the banks. It only takes a couple of missed payments for home loan provider to be “under water” with a home loan. Do not labour under the misapprehension that you are doing the bank a favour by having a home loan with them – the home loan itself is not a very lucrative proposition. Nevertheless, the fixed costs of originating new home loans are quite high. Banks, home loan or credit providers generally prefer to rehabilitate existing customers rather than terminating the agreement, foreclosing, and then having to originate new debt. Take all opportunities to steer your own boat off the foreclosure rocks. Your finances cannot afford to be shipwrecked there. 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  The single woman’s guide to buying their first home
Almost 60% of South African homes are owned or co-owned by women, and women are increasingly buying property without a spouse or partner. “Many will be first-time buyers who are hesitant to commit because they feel they are unable to afford such an investment,” says Renier Kriek, Managing Director at Sentinel Homes. As someone who deals with single or unmarried property seekers regularly, Kriek offers some good advice to help you find the best way to finance your purchase. Rise of the female homeowner As modern family dynamics change, one demographic indicates that more than 40% of South African children now live with their mother only. This is greater than the number residing with both parents or another related adult. “Traditionally,it is believed that homeownership is one way to create the stable and secure setting that is conducive to childrearing. This cultural attitude, coupled with demographic changes, may explain the surge in women buyers,” says Kriek. Yet, buying a property on a sole income can be daunting for anyone, regardless of gender, especially since property prices have risen faster than salaries over the past 70 years. However, Kriek warns that once the practical results of the election have become clear and the long-anticipated interest rates cut has arrived, pent up demand will surely unleash a buying spree that sends property prices skyrocketing. Buying now, before the market rises, is probably preferable to buy now, especially for those buyers who must stand on their toes to buy a property in the first place, such as single men and women who only have the benefit of one income. “With the current buyer’s market, it is the ideal time to invest in a home that’s still affordable,” he says. Buying a home on a solo budget To find the best property, you first need to decide how you will pay for it. Here are some great tips to consider: Your primary concern is how much you can get together for your investment. This starts with an honest assessment of your financial position and credit record, since you will likely need to apply for a bond, which may require a substantial deposit. Then, do your research to discover alternative financing solutions. For example, the government’s First Home Finance subsidy offers qualifying applicants free financing that can be combined with other housing products, like mortgage loans. The options are out there, you just need to find them. However, don’t be tempted by shady loans that make getting into debt easy but whose crushing rates will eventually leave you penniless - and maybe even homeless. Next, implement sensible lifestyle changes. Now is a good time to start paying off lesser debts to free up disposable income and improve your credit rating. Also ask yourself which expenses you’re willing to live without, like your Netflix subscription or weekend takeaways. It all adds up. Ask your employer if they provide assistance with property purchases. For instance, some banks may offer certain staff home loans with low or no deposit, and some employers may offer formal or informal programs of assistance to those who wish to buy. Most importantly, be aware that every property comes with initial and monthly costs, some obvious and some hidden. Upfront, you’ll face transfer and registration fees, and transfer duty. Then, there are the ongoing and adhoc costs, such municipal costs, sectional title levies and consumption costs. You are also responsible for home maintenance and repairs, and other infrequent expenses that don’t normally affect renters. Make sure you work these into your calculations. Getting value from property Now, consider the best type of property to buy. Most single people prefer a lock-up-and-go home, like a property in a sectional title complex. Currently, sectional titles make up more than half of the properties in the country due to their excellent value-for-money proposition. For instance, they allow you to enjoy many of the benefits of a free-standing property, albeit in a communal setting. The cost of security, gardening, property maintenance, a swimming pool and entertainment areas, and more, is shared among owners, making these amenities affordable and accessible to each. “Given the demand, this is also the easiest property to sell when your lifestyle needs change, again making it the best for a first-time owner,” says Kriek. If your employer is open to you working remotely, or you can run your own business remotely, you may find better value in rural areas or the countryside. In such regions, your bond might be cheaper than your current rental, so keep an open mind. Also, determine if the property could somehow pay for itself. A granny flat or spare room that can be rented out for additional income certainly helps to ease bond repayments. Lastly, buy with the end in mind. One day, you may want to sell your starter home for the highest price you can get. To ensure its value keeps pace with the market, look at the basics most buyers demand, such as its proximity to schools, shops, hospitals, daycare and similar amenities. Also, try not to buy property in declining areas – low prices may in fact be a value trap. The rewards of due diligence As a single woman, who may also be a mother, your first home might seem like a distant dream, but it could be more affordable than you think. “As long as you are willing to do your homework, you might be surprised at what is possible and how soon you can have what you want,” 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  There is a major surge in investment in buy-to-let properties across South Africa, with the Western Cape leading the pack.
"We're seeing a 15 year high in national investment applications, which rose to 11.8 percent of all applications by the last quarter of 2023," says Renier Kriek, Managing Director at Sentinel Homes, who bought his first investment property at 19 and has been investing in residential property ever since. Usually, this figure is around 5 percent. Kriek is quoting recent ooba Home Loans market data which also puts investment applications in the Western Cape at a whopping 28.2 percent of total applications. "The housing demand in the province is enormous and property investors are obviously taking note," says Kriek. Investors, not home buyers Home buyers are hesitant to buy right now due to uncertainty around the upcoming election, as well as the rising cost of living caused by inflation and high interest rates. This could mean current data may be skewed by their lower participation, making investment applications appear greater as a percentage. Even so, it also indicates that property investors remain confident, active in the market, and resilient regardless of economic pressures. Property investment may also be seen as more secure in the current uncertain political climate. Why is property investment vibrant? One reason is the ongoing trend of semigration, with South Africans flocking to areas offering better infrastructure and service delivery. This is especially true of the Western Cape where new property development lags the influx of semigrants. Many coming to the province now rent while searching for a new home or while theirs is being built. Another reason is the return of tourists to Cape Town, still one of the top holiday destinations in the world. Investors are already snapping up prime properties they can rent out as short-term leases and holiday accommodations. The increased demand for rentals and improving performance in rental properties, including lower vacancies and tenant defaults, is driving the wave of buy-to-let investment applications. Tips for investors So, if people are serious about investment buying, does Sentinel Homes have any tips for them? "Indeed, we do," says Kriek.
New and experienced investors alike can benefit from Krieks advice. ENDS MEDIA CONTACT: Idele Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Home  A path to financial security is home ownership. Since there is no rule saying your first property must be a home to live in, you have the freedom to buy the home you can afford as the best way of getting started.
Asset prices have escalated much faster than wage increases over the past 70 years and that trend is likely to continue. This simply means that homes are becoming less affordable, says Renier Kriek, MD of Sentinel Homes, a non-bank home loan provider. “If the trend of decoupling asset and wage prices is going to continue the best bet is to get into the property market sooner rather than later. Particularly when there are so many bargains to be had.” First time home buyers are progressively becoming older because of affordability. It has moved from around 30 to 32 years to around 38 to 40 years. “You must get in earlier to buck this trend. If you wait until the time you can afford your dream home you may never be able to achieve that goal.” It is now a buyer’s market. Kriek explains that South Africa is coming off from a high-inflation-high-interest-rate cycle. “Inflation has become a more manageable beast, and market watchers are starting to predict a decline in interest rates next year.” Time the market Unfortunately, very few people act until they see the first rate cut. By then the cat is out of the bag and the market will change quite rapidly. “If you want to time the market you have to buy now.” Kriek says first time buyers who can afford to acquire a real estate asset at current interest rates will likely be able to afford it through the cycle; and they are unlikely to purchase a property they can’t afford. “The ugly duckling may be a better start than the shiny house on the hill.” He also suggests that prospective buyers use a bond originator to get prequalification for a home loan. “It shows that you are a serious purchaser, which makes everyone so much more willing and able to help.” Real estate, whether it is your own home or an investment property, comes with expenses and tax consequences. However, if you do not want to live from wage-to-wage for the rest of your life then some sacrifices are called for to enter the property market. “Every goal has some sacrifices and the sacrifices for financial goals are of the living standard kind. If you want to truly benefit from asset ownership you will have to suffer some short term discomfort. That is reality.” Take the leap Owning inflation-beating assets, like residential real estate in the correct areas and markets, is generally a good idea. Kriek has 19 years of property investment experience. His advice:
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  Overregulation of the housing market in South Africa is discouraging the private sector from investing in formal low-cost housing projects.
This is according to Renier Kriek, Managing Director at Sentinel Homes. "With government resources being limited and corruption widespread, it is imperative that private capital is enticed to join the constitutional project of granting all South Africans access to adequate housing," he says. It is apparent that, for all the government's initiatives, programmes and subsidies to provide RDP housing, a vast number of underprivileged citizens still reside in informal settlements. However, while tax breaks exist for new or improved rental housing, with added incentives for low-cost housing, the rest of the legal and policy landscape is much less persuasive to investors. Mortgage risk For one, housing consumers who earn less than R15,000.00 per month make up less than 0.6 percent in value and 1.7 percent in number of accounts granted mortgages in Q1 2023, matching a decade long trend. This is because banks tend to avoid these riskier applicants, even when supported by the government's Finance-Linked Subsidy Programme (FLISP). The reason is simple: the excessively long and inefficient foreclosure process in South Africa seems bent on ensuring losses for both banks and defaulting consumers. In addition, judges are often overly sympathetic to defaulting debtors per case, not considering the overall negative effect this has on banks' attitude towards financing the larger underprivileged community. "However, if the cost of terminating defaulting mortgages were low, banks would be less risk averse, thereby increasing the likelihood of access by this segment," says Kriek. Rental risk Similar to mortgages, the time and financial costs of eviction are too high, and the law and courts too lenient on defaulting renters. With the supply of formal housing being so low, the cost of eviction should also be low and the rights of a large number of potential tenants should weigh more heavily than those of a few non-paying tenants. "If the risk was low, more landlords would emerge to invest in satisfying the obvious demand for affordable accommodation," says Kriek. Development rules Lastly, housing development in South Africa is inhibited by long or delayed regulatory processes, as well as building standards designed around first-world circumstances. This is further exacerbated by municipal inefficiency, which affects delivery of essential services like roads, water, power and sanitation. Authorities have also suddenly become deeply concerned with the lack of affordable housing. Their response has been to request that developers include affordable housing units in new developments, even in areas not marked for such housing. "While laudable at first glance, this does not increase the availability of affordable housing as beneficiaries will often flip the unit at market price to realise a profit," says Kriek. The positive intent is therefore negated and leaves the market worse off. Change Is Needed Mortgage risk, rental risk and misguided development rules, taken together, disincentivise the development of low-cost housing in favour of larger, pricier units. "Given the state of the country’s housing market, urgent legal reforms and business-friendly policies are needed to ensure all South Africans gain access to constitutionally mandated housing," 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 Home |
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