 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
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 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 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  This year, almost half of the world's inhabitants will head to the polls to elect their new governments, including 8 of the world’s 10 most populous countries.
"In South Africa, we can expect our own election to put the property market into a temporary holding pattern, dragging on the subtle buyer’s market we have been experiencing" says Renier Kriek, Managing Director at Sentinel Homes. While he advises owners to wait until the end of the year to consider selling their property, Kriek cautions buyers to not get caught up in election fears and miss out on real estate bargains. The impact of sentiment All market behaviours are driven by sentiment. South Africans face uncertainty around the outcome of the election and the likelihood that, for the first time in its history, the country will be led by a coalition government at the national level. This creates negative sentiment that is also being fuelled by the heightened and increasingly populist rhetoric of competing political parties. And persistent factors, like the delay in interest rate cuts and a declining rand, only add to the doubt. "While we were all hoping for a downturn in the rate cycle at SARB's May or July meeting, I now doubt anything will happen before September. The MPC remains hawkish and seem unlikely to move interest rates down before the US Federal Reserve has lowered their policy rate," says Kriek. That's expected well after the election and these compounded concerns are pushing people to take a wait-and-see approach, including in the buying and selling of property. A first for South Africa All countries with a proportional representation electoral system eventually face a coalition government scenario. The likelihood of a national governing coalition is therefore a sign that our political system is maturing. This will be South Africa's first coalition government at a national level and the norms associated with such a structure have never been firmly established among the political class or the voting population. While national coalitions are a sign of progress and maturity, it is likely to lead to a lot of short- to medium-term noise, that is likely to have a continuing and unpredictable impact on sentiment in all markets, including the property market. The nearest we have to some agreement is the Multiparty Charter whose only purpose is to counter a national coalition between the ANC and EFF. Countries like Belgium with older proportional representation systems have developed the advanced bureaucracy necessary to almost run the country on autopilot, even without a government. South Africa, however, still needs to find its footing in any coalition pacts and develop the necessary protocols among participants intent on promoting their own interests. "This means things will probably be noisy and messy for some time after the election, as parties attempt to nail down the terms of their respective alliances," says Kriek. What to expect from property Currently, it's still a buyer's market for property and it definitely won't turn into a seller's market until after the election and a rate cut. Until then, we can expect that property price growth will remain low. Once the election outcome is known, and provided we have avoided worst-case scenarios, and the rate cut is at hand, we can expect pent-up demand for property to spill into the market and significantly increase demand. In addition, weak economic growth means sellers who can afford to wait should indeed wait until spring or summer to see if they can fetch a good price for their property relative to the market. Winter is historically not a great time for selling homes anyway. Despite the general modd brought on by politics and the interest rate cycle, the market in the Western Cape remains buoyant and there are signs of buyers returning in earnest to areas like southern Gauteng and areas eastof Pretoria. The smart money of property investors also remains in the market, signalling that opportunities exist. Along with low property price growth, this means that astute buyers can still pick up bargains while others hesitate. "If you want to buy, buy now and don't be put off by sentiment-driven hesitance that currently prevails in the market election sentiment," advises Kriek. “In the South African property property market, due to structural factors, what goes down must eventually come up.” 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  South Africans who have been hesitating to buy a new home due to high interest rates may finally be able to take the plunge.
"For the first time since April 2022, the Consumer Price Index (CPI) has fallen back within the Reserve Bank’s target band of between 3-6 percent," says Renier Kriek, Managing Director at Sentinel Homes. According to Kriek, a lower CPI indicates that inflation has potentially peaked. This will likely mean stabilization of the market interest rates and a repo rate reduction could even be on the way. Signs that inflation is falling Since the disruption to world economies caused by COVID-19, several factors subsequently contributed to high global inflation, from which South Africa was not spared. Inflation often occurs because the difference between consumer demand for items and producers' ability to supply them causes their prices to increase too sharply to remain affordable. It may also result from a drop in the relative purchasing value of money due to various economic factors. Inflation in South Africa is measured through the Consumer Price Index (CPI) compiled by Stats SA. The South African Reserve Bank (SARB) follows a policy of keeping any changes in the CPI within a range of 3 to 6 percent year-on-year, preferring to keep it anchored at 5 percent. Even before local CPI breached 6 percent earlier last year, SARB moved to reign in inflation with 10 consecutive increases in the repo rate, to the current level of 8.25 percent. Interest rates consumers are charged on their debt, such as the prime rate, are linked to the repo rate. This means that rises in the repo rate makes repayments on debts like home, car and personal loans more expensive, forcing consumers to curb non-essential purchases and bringing rampant price increases down. However, on 21 July 2023, the SARB's Monetary Policy Committee announced the repo rate would stay unchanged at 8.25 percent, saying it remains cautious. The main reason a further increase was avoided is the drop in the CPI from almost 7 percent in April to only 5.4 percent in July. The July CPI was even lower than what economists predicted. "For consumers, this means that, barring unforeseen increases in inflation, the repo rate will remain steady and might even be reduced in September, when the Committee meets again," says Kriek. Are there homes to buy? The South African economy created 1.2 million new jobs between the first quarter of 2022 and the first quarter of 2023, despite challenges like inflation, loadshedding and poor service delivery. If the repo rate drops as expected, this will put even more money in people's pockets and boost economic activity. In short, things are looking up for South Africans, especially those with their hearts set on buying a home. Although estate agents report a shortage of stock from resilient homeowners desperate to keep their properties, home loan debtors are clearly facing heavy stress from current high interest rates. The National Credit Regulator reports that while the number of mortgages not in arrears are usually around 91 percent of total home loans, the first quarter of 2023 saw a drop to 88.85 percent. The arrears rate has steadily increased as interest rates climbed higher. "Banks will likely be eager to help owners in arrears with payments start the process of selling those properties, meaning we are likely to see increased stock coming onto the market soon,” says Kriek. “The normal stock cycle in the property market will also return if sellers see positive signals, such as stagnation or decline in interest rates. Until that time, sellers are likely to hold out on selling as much as they can to avoid being price takers.” Is it time to buy? Of course, the best time to buy depends on various factors and conditions, changing from region to region, case to case and price range to price range. However, Kriek says for anyone set on semigrating from the northern provinces to the Western Cape or elsewehere on the coast, the time is ripe to buy and they should not wait. Properties selling against home loan debt typically carry an average sales value of around R1.3 million. Properties at this price point and anything below the average price have seen and will continue to yield a respectable return on investment. “Demand very clearly outstrips supply for properties priced below the average,” says Kriek. The exception is properties in the very high range, above R4 million. "I see evidence that prices will come down further so it may be best for prospective buyers in that price range to bide their time until the market bottoms out,” says Kriek. “Of course, there are exceptions, such as Sea Point or Stellenbosch.” Lastly, Kriek advises that, with interest rates having peaked, purchasers should opt for a variable interest rate instead of a fixed interest rate. "Homeowners taking advantage of the eventual drop in the repo rate can enjoy their property while reducing their bond repayments," 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  Homes farther out, and more reasonably priced. This is increasingly what South African property buyers are looking for. “There are multiple reasons contributing to this trend,” explains Renier Kriek, CEO of home financing company Sentinel Homes.
"Rising interest rates and the resulting decline in transaction volume are significant factors. The increased proportion of ‘motivated sellers,’ selling because they are in a rising costs squeeze, are now likely to stabilise price growth until the rate hiking cycle eases off or starts to reverse.” According to Kriek, the consequences of the Covid-19 pandemic are also still very visible. “Office vacancy rates have increased, resulting in consumers no longer being as motivated by office proximity when selecting homes. This means they can search for value in outlying areas. Many even semigrate to other parts of the country. We also expect to see a rising level of commercial to residential conversions in urban areas. Semigration and its cousin convenience Kriek names the current hottest markets and sites for real estate investment as the coastal regions from the West Coast to Cape Town and Mossel Bay. “The Mother City remains very popular despite high prices and strained infrastructure,” he says. “This thanks to their loadshedding buffer due to the City’s generation projects and other electricity initiatives, as well as the city’s lifestyle benefits.” He claims that the Garden Route and George Airport’s close proximity make this popular tourist destination just as convenient as Cape Town. “But it must be highlighted that the affordability benefit there is quickly waning because this area has become a focus for immigrants from both inside and outside the Western Cape.” Finally, the West Coast (north of Cape Town) is also seeing a rise in the real estate market, thanks to its charming tiny fishing villages and rural communities like Langebaan, St Helena Bay and Paternoster. “Consumers who work from home are discovering the real value in pricing that was previously only influenced by variables connected to the regional fishing and farming industry. Due to external demand for property, it is now unbound. On the other hand, gentrification problems may result from this and increasingly poor access to housing for families in the bottom half of the income spectrum is a real threat.” Kriek says those still buying property in the economic hub of Gauteng, are shying away from freehold properties, such as single houses on larger plots in unguarded neighborhoods. “They prefer estates and sectional schemes. This is likely a search for safety and services,” he elaborates. Those entering the Gauteng property market will likely find the best long-term investment to be inside a security estate or secured sectional title scheme. Owners of freehold properties in more traditional suburbs may consider cashing out and moving with the trend in the interest of their longer-term financial well-being.” Challenges for First Time Buyers Kriek says that first-time buyers - who make up a very large proportion of purchasers - are moving into the property market much later. This trend is continuing to intensify. The lack of affordable housing supply and inefficient housing finance market in the affordable or gap housing market, specifically properties priced under R750 000, contributes significantly to this trend. “The National government, through the Department of Human Settlements, unveiled significant updates to their Finance Linked Individual Subsidy Programme (FLISP), now called First Home Finance, with the aim to improve access to affordable and gap housing. The expanded policy is still in the nascent stage of implementation, however, and its effects are likely not to be evident in market trends until next year.” Kriek adds that Sentinel Homes offers the first open-market alternative to mortgages. By expanding access to housing finance, it is serving those 5%-10% of housing consumers who lack housing finance, despite being creditworthy and having the necessary disposable income. “Now is the time in the property market cycle to escape the rent trap and start meaningful steps toward long-term financial health. Homeownership is a significant part of that equation,” says Kriek. “You are more likely to buy something you can really afford if you buy it in the current conditions. There is the added upside that prices for properties priced around the average can only really go one way from here – and that is up!” 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 |
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